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THE    NEW 
PROTECTIONISM 

BY 

J.     A.     HOBSON 


author  of 
'•'tuf  industrial  system,     etc. 


G.    P.    PUTNAM'S    SONS 

NEW   YORK 
1916 


V 


All  rights  reserved 
Printed  in  Great  Britain 


CONTENTS 


CHAPTER 

I.   THE  REVIVAL   OF  PROTECTIONISM 
II.   DEFENCE   AND   OPULENCE 

III.  THE  TANGLES  OF  A  TARIFF 

IV.  PROTECTION   NO  DEFENCE      - 
V.    NAVIGATION   LAWS     - 

VI.    HOW  TO  MEET  TRADE  AGGRESSION 
VII.  THE  CASE   OF  AGRICULTURE 
VIIL    FREE  TRADE  AS  A  POLICY     - 
IX.   THE  OPEN   DOOR 


PAGE 
1 

18 
34 
52 
60 
73 
87 
103 
113 


APPENDIX   A 
APPENDIX    B 


141 
153 


o  n  n  »>  Hs*  /^ 


PREFACE 

It  is  not  my  purpose  in  these  chapters  to 
traverse  the  whole  field  of  controversy  be- 
tween Protectionists  and  Free  Traders,  culti- 
vated so  intensively  during  the  years  follow- 
ing the  Chamberlain  proposals  of  1903-1905. 
During  this  war  the  fiscal  problem  has  taken 
a  new  aspect.  Protectionists  have  found  in 
the  associations  and  divisions  among  nations 
imposed  by  war,  and  the  necessities  or  ex- 
pediencies of  war  economics,  a  new  fund  of 
hope  and  opportunity  for  the  achievement 
of  their  objects.  During  the  war  the  enemy's 
trade  is  part  of  the  enemy's  war  resources, 
and  is  rightly  made  an  object  of  attack.  In 
the  general  atmosphere  of  international  an- 
tagonism it  is  not  difficult  to  represent  this 
same  trade  as  inimical  to  our  interests  and  a 
potential  source  of  danger  to  our  country 

vii 


viii  PREFACE 


even  in  time  of  peace.  The  revival  and 
growth  of  German  industry  and  commerce 
after  the  war  will,  it  is  urged,  enable 
Germany  to  prepare  for  another  war.  We 
must  therefore  do  all  we  can  to  prevent 
that  revival  and  retard  that  growth.  More- 
over, German  business  men  subordinate 
their  private  profit-seeking  to  political 
ends,  dumping  goods,  invading  markets, 
driving  wedges  of  finance,  in  order  that  the 
"  economic  domination  "  thus  obtained  may 
be  placed  at  the  service  of  a  powerful 
aggressive  State.  This  State  they  see  com- 
bining with  and  subjugating  its  neighbours, 
so  as  to  form  a  powerful  political  and 
economic  system  of  Central  Europe,  which 
will  reach  out  its  commercial  and  financial 
tentacles  so  as  to  drag  in  other  neutral 
countries.  This  huge  menace  of  a  future 
German  world-power,  political  and  economic, 
and,  when  the  time  comes,  military,  is 
paraded  before  the  heated  and  confused 
imagination  of  our  people  by  our  New  Pro- 
tectionists. 


PREFACE  ix 


My  object  is  to  inspect  and  test,  first,  the 
substance  of  this  economic  menace,  and, 
secondly,  the  vahdity  of  the  measures  by 
which  it  is  proposed  to  meet  it.  The  New 
Protectionism  differs  from  the  Old  in  seek- 
ing to  superimpose  the  present  war  map  of 
the  world,  wdth  its  divisions  of  belligerents, 
allies,  and  neutrals,  upon  the  Protectionism 
of  1903-1905,  which  sought  to  combine  pro- 
tection for  British  industries  with  a  closer 
business  connection  between  the  self-govern- 
ing dominions  and  the  mother-country.  To 
extract  a  definite  intelligible  shape  for  this 
Xew  Protectionism  out  of  the  general 
rhetoric  in  which  it  is  embedded  by  most 
of  its  exponents  is  no  easy  task.  Its  principal 
organs  in  the  Press — such  as  the  Morning 
Post,  the  Northcliffe  papers,  and  by  recent 
conversion  the  Spectatoi^  —  do  not  agree 
among  themselves  either  as  to  scope,  objects, 
or  methods ;  and  the  Chambers  of  Com- 
merce— more  concerned  with  business  and 
less  with  politics — formulate  proposals  w^oe- 
fully  deficient  in  that  element  of  "defence" 


PREFACE 


which  is  of  primary  importance  to  poUtical 
enthusiasts. 

The  single  fact  which  ought  to  guide  us 
in  our  interpretation  of  the  New  Protec- 
tionism is  that  the  moving  and  moulding 
spirit  is  the  evident  desire  of  groups  of 
business  men  to  exploit  the  emotions  of 
friendship  and  antagonism  generated  by  the 
war  and  the  immediate  economic  exigencies 
of  the  situation,  in  order  a  get  a  pubhc  policy 
which  will  yield  them  private  profit.  Multi- 
tudes of  other  men  are  moved  by  patriotic 
and  other  uncommercial  motives  to  applaud 
and  to  promote  a  Protectionist  pohcy,  but 
all  experience  shows  that  they  do  little  to 
determine  the  form  that  policy  takes.  The 
famous  saying  of  Sir  James  Fitzjames 
Stephen,  that  "  The  world  is  made  for 
hard  practical  men  who  know  what  they 
want  and  mean  to  get  it,"  finds  no  more 
convincing  corroboration  than  in  the  annals 
of  Protection. 

The   perception  of  this  central  truth   is 
doubtless  obscured  at  present  by  the  promi- 


PREFACE  xi 


nence  given  by  war  pressure  to  what  is  in 
its  ultimate  signiticance  a  sharp  business 
enterprise.  The  Paris  Conference,  for 
example — a  copy  of  the  Report  of  which 
is  here  given  as  an  appendix — focuses  at- 
tention upon  the  Alliance  as  an  economic 
system  for  the  conduct  of  the  war,  and 
for  defensive  work  afterwards.  With  the 
economic  war  policy  itself  I  am  not  con- 
cerned to  deal.  But  the  measures  proposed 
for  common  action  during  the  period  of 
reconstruction,  and  the  permanent  measures 
of  mutual  assistance  and  collaboration,  raise 
issues  of  great  moment  for  those  who  regard 
Free  Trade  as  economically  sound,  and  con- 
sider a  policy  aiming  at  a  lasting  severance 
between  the  present  belligerent  groups  as 
a  menace  to  the  future  peace  of  the  world. 
Although  the  document  nowliere  explicitly 
commits  this  country  to  any  tariff  or  other 
definitely  Protectionist  act.  it  lays  down  a 
line  of  policy  which  involves  Protection. 
The  very  language  of  its  preamble  is  re- 
plete with  Protectionist  assumptions.     Our 


xii  PREFACE 


^-.,^— ,».^.»-^  ■ 


enemies  are  represented  as  preparing  for 
"a  contest  on  the  economic  plane."  Their 
preparations  **have  the  obvious  object  of 
estabhshing  the  domination  of  the  latter 
{Le,,  the  enemy)  over  the  production  and 
markets  of  the  whole  world,  and  of  imposing 
on  other  countries  an  intolerable  yoke.  In 
face  of  so  grave  a  peril,  the  representatives 
of  the  Allied  Governments  consider  that  it 
has  become  their  duty— on  grounds  of  neces- 
sary and  legitimate  defence — to  adopt  and 
realize  from  now  onward  all  the  measures 
requisite,  on  the  one  hand,  to  secure  for 
themselves  and  for  the  whole  of  the  markets 
of  neutral  countries  full  economic  indepen- 
dence and  respect  for  sound  commercial 
practice  ;  and,  on  the  other  hand,  to  facilitate 
the  organization  on  a  permanent  basis  of 
their  economic  alliance." 

Now,  in  this  book  I  examine  the  curious 
assumptions  of  this  passage — the  notion  of 
trade  as  a  ''contest"  in  which  one  of  the 
trading  parties  secures  ''  domination  "  over 
the  other,  the  notion  that  protective  tariffs 


PREFACE  xiii 


and  other  barriers  are  needed  for  ''  defence,'* 
and  the  notion  that  such  "  defence  "  can  be 
successfully  obtained  by  any  of  these  methods. 
The  assumption  that  German  trade  and 
finance  are  mainly  and  normally  State  in- 
struments— departures  from  "  sound  com- 
mercial practice  " — and  that  the  Allies  are 
called  on  not  merely  to  defend  themselvxs 
against  this  invasion  and  this  domina- 
tion, but  also  to  secure  the  "  independence  " 
of  the  neutral  markets,  is  a  blend  of  naivete 
and  ignorance  to  which  it  is  difficult  to  do 
full  justice. 

Though  history  lends  little  support  to  the 
conviction  that  war  alliances  are  of  so  firm 
and  durable  a  nature  as  to  afford  a  reliable 
basis  for  far-sighted  business  arrangements, 
Free  Trade  has  nothing  but  commendation 
for  proposals  for  closer  and  more  effective 
trade  relations  between  allies,  provided  they 
are  not  intended,  and  do  not  in  fact  work 
out,  as  a  policy  of  exclusion  and  hostility  to 
other  countries.  Schemes  for  the  improve- 
ment of  transport,  postal  and  other  com- 


xiv  PREFACE 


munications,  for  identical  facilities  in  patent 
law,  trade-marks,  and  copyright,  as  between 
the  members  of  the  allied  countries,  amount 
pi^o  tanto  to  an  extension  of  the  area  and 
liberty  of  human  intercourse  beyond  the 
national  barriers,  and  as  such  are  in  every 
way  desirable. 

But  economic  sanity  regards  with  very 
different  eyes  the  first  heading  of  the  "  Per- 
manent Measures" — viz.,  "Economic  Inde- 
pendence of  Enemy  Countries,"  with  its 
opening  paragraphs.  "  The  Allies  decide  to 
take  the  necessary  steps  without  delay  to 
render  themselves  independent  of  the  enemy 
countries  in  so  far  as  regards  the  raw 
materials  and  manufactured  articles  essential 
to  the  normal  development  of  their  economic 
activities.  These  measures  should  be  directed 
to  assuring  the  independence  of  the  Allies, 
not  only  as  regards  their  sources  of  supply, 
but  also  as  regards  their  financial,  com- 
mercial, and  maritime  organization." 

Now,  though  neither  here  nor  elsewhere 
in  the  Report  is  there  any  definite  agree- 


PREFACE  XV 

merit  to  adopt  a  policy  of  Tariffs,  Export 
Duties,  Navigation  Acts,  Financial  Boycott, 
or  other  specified  weapons  of  Protectionism, 
the  policy  indicated  is  one  which  plainly  in- 
volves, or  indeed  demands,  the  applica- 
tion of  such  measures.  "Economic  Inde- 
pendence "  of  the  kind  described,  though  it 
does  not  preclude  all  commerce  with  the 
Central  Powers,  clearly  contemplates  the 
exclusion  from  this  country  of  most  of 
the  staple  imports  which  have  liitherto 
come  in,  such  as  sugar,  steel  and  iron, 
machinery,  glass  and  glassware,  cotton  and 
woollen  yarns  and  goods.  The  organization 
of  Allied  commerce,  finance,  and  maiitime 
arrangements,  for  complete  "  independence  " 
implies  not  merely  prohibitory  tariffs  on 
large  classes  of  goods,  but  legal  measures 
for  the  exclusion  of  German  capital  from  all 
employment  in  the  Allied  countries,  and 
restrictive  or  prohibitive  measures  against 
German  and  Austrian  shipping.  Whether 
"  independence "  be  interpreted  as  absolute 
exclusion,    or     as     security    against     such 


xvi  PREFACE 


economic  intercourse  as  brings  ''depen-  i 
dence,"  it  can  only  be  compassed  by  \ 
methods  of  State  preference  or  State  boy-  i 
eott,  which  constitute  a  radical  departure 
from  the  accepted  economic  policy  of  Great  | 
Britain.  Whatever  were  the  specific  methods  \ 
adopted  to  secure  the  object,  it  would  have  j 
two  economically  and  politically  disastrous  \ 
results.  In  the  first  place,  by  narrowing  \ 
the  area  of  our  free  external  markets,  it  i 
would  diminish  the  total  gains  of  British  \ 
industry  and  commerce,  and  render  more  ; 
precarious  the  livelihood  of  a  population  ] 
and  a  trade  dependent  for  existence  upon  | 
large  and  assured  access  to  varied  sources  i 
of  overseas  supplies.  Secondly,  by  breaking  I 
Europe  into  two  nominally  independent  \ 
but  really  hostile  and  competing  economic 
systems,  it  would  foster  conflicts  in  all  parts 
of  the  world,  maintain  and  feed  the  bitter  1 
memories  of  this  war,  stimulate  the  main- 
tenance and  growth  of  armaments,  and  ! 
render  another  war  inevitable.  i 

Moreover,  the  first  aggressive  step  in  this     j 


PREFACE  xvii  ! 


"  war  after  the  war  "  would  have  been  taken, 
not  by  the  Central  Powers,  but  by  the  Allies, 
and  the  false  charge  made  by  German  pub- 
licists, that  the  main  actuating  motive  of 
Great  Britain  in  entering  the  war  was 
jealousy  of  the  growth  of  German  trade 
and  a  desire  to  crush  a  trade  rival,  would 
receive  a  most  specious  corroboration.  For 
though  the  Paris  Report  opens  by  the  state- 
ment that  *'the  Empires  of  Central  Europe 
are  to-day  preparing,  in  concert  with  their 
allies,  for  a  contest  on  the  economic  plane," 
there  is  no  evidence  that  any  single  step  has 
actually  been  taken  towards  this  preparation. 
On  the  contrary,  even  the  informal  proposals 
that  Austro-Hungary  shall  enter  into  some 
economic  alhance  with  the  German  Empire, 
propounded  many  months  ago,  have  met 
with  such  strenuous  opposition  both  in 
Vienna  and  in  Buda-Pesth  that  they  appear 
to  have  been  abandoned.  The  first  effect  of 
the  Paris  Conference,  should  it  take  shape 
in  any  practical  measures  of  co-operation  for 
an  after-war  trade  policy,  will  be  to  give 


xviii  PREFACE 


fresh  vigour  to  the  German  advocates  of  an 
economic  Middle  Europe  by  enabUng  them 
to  represent  their  scheme  as  a  necessary- 
defence  against  the  economic  warfare  already 
announced  by  the  Allies. 

Another  obvious  vice  of  any  binding 
economic  arrangement  made  now  by  the 
Allies  for  operation  after  the  war  is  that  it 
impairs  our  freedom  of  action  at  the  Peace 
Settlement  for  the  all-important  work  of 
placing  international  relations  upon  a  better 
basis  of  security.  No  League  of  Nations, 
such  as  President  Wilson  and  Sir  Edward 
Grey  (to  name  but  two  of  many  important 
J  supporters  of  this  plan)  still  contemplate  as 
possible,  could  come  into  existence  if,  at 
the  close  of  the  military  conflict,  the  two 
belhgerent  groups  had  already  committed 
themselves  to  a  permanent  war  of  commerce. 

These  considerations  give  the  gravest  sig- 
nificance to  the  concluding  paragraph  of  the 
Paris  Report,  in  which  "  the  representatives 
of  the  Allied  Governments  undertake  to 
recommend   their  respective   Governments 


PREFACE  xix 


to  take  without  delay  all  the  measures, 
whether  temporary  or  permanent,  requisite 
for  giving  full  and  complete  effect  to  this 
policy  forthwith."  This  indecent  haste  can 
only  have  one  meaning  so  far  as  this  country  / 
is  concerned.  It  is  designed  to  enable  our 
Protectionists  to  reverse  the  permanent 
fiscal  policy  under  cover  of  a  war  emer- 
gency, and  by  the  aid  of  the  hot  passions 
and  confused  judgment  which  such  a  situa- 
tion engenders.     This  interpretation  is  sup- 


ported by  the  action  taken  by  the  Colonial 
Secretary,  before  the  ink  of  this  Report  was 
dry,  in  directing  the  Colonies  to  impose 
forthwith,  and  for  five  years  after  the  war,  an 
export  duty  of  £2  a  ton  upon  all  palm-kernels 
exported  to  foreign  countries.  Primarily 
directed  to  destroy  the  German  manufac- 
tures of  palm-oil,  a  basis  of  several  important 
products,  such  as  soap,  margarine,  and  oil- 
cake, this  return  to  our  early  colonial  policy 
of  preference  for  the  home  market  will 
create  alarm  in  all  neutral  foreign  countries, 
and  will,  by  enhancing  the  uncertainty  of 


XX  PREFACE 


future    trade,    make   a   speedy    return    to 
normal  industry  after  the  war  more  difficult   j 

for  every  nation,  belligerent  or  neutral.  j 

^i 

The  greater  part  of  my  argument  eon-  ; 
cerns  itself  with  a  discussion  of  the  economic  ' 
results  which  would  flow  from  the  attempt  \ 
to  apply  in  practice  the  proposals  of  the  [ 
New  Protectionism.  But  in  a  concluding  j 
chapter  I  sketch  the  outlines  of  a  construe-  ! 
tive  policy  of  "  The  Open  Door,"  a  rational  I 
alternative  to  the  destructive  policy  of  the  \ 
New  Protectionists,  and  designed  to  promote  j 
co-operation  instead  of  conflict  between  th^  | 
Governments  of  the  commercial  nations  and  j 
the  business  groups  who  chiefly  mould  their  ; 
foreign  policy. 

A  portion  of  the  argument  was  published  ' 
recently  in  a  series  of  articles  in  the  Man-  \ 
cheste?'  Guardian,  to  the  proprietors  of  which  \ 
I  am  indebted  for  permission  to  make  this  I 
further  use  of  them.  .         \ 

J.  A.  HOBSON.       ' 

i 
Hampstead.  .■ 

June  24,  1916.  ;| 


THE 

NEW    PROTECTIONISM 

CHAPTER  I 

THE  RE\  IVAI.  OF  ruOTECTIONISM 

The  policy  of  Free  Trade  is  based  upon  a 
reasoned  belief  that  all  commerce  is  an  ex- 
change between  the  goods  or  services  of  one 
person  and  tliose  of  another,  this  exchange 
being  usually  effected  by  two  monetary 
transactions — an  act  of  sale  and  an  act  of 
purchase.  Both  parties  in  such  commerce 
are  gainers  from  it,  and  their  gains  tend  to 
be  equal.  The  material  advantage  of  this 
process  is  unaffected  by  the  consideration 
that  the  two  parties  may  be  members  of 
different  political  communities.  The  wider 
the  area,  the  freer  and  more  secure  the  nature 
of  this  intercourse,  the  greater  is  the  net 

1 


2      *        THE  NEW  PROTECTIONISM 


gain,  both  to  those  parties  directly  engsiging 
in  each  act  of  commerce  and  to  those  who 
indirectly  profit  by  doing  business  with 
parties  thus  enriched.  The  vahdity  of  this 
economy  of  co-operation  by  division  of 
labour  is  as  obvious  in  practice  as  in  logic. 
Almost  everyone  admits  it  on  a  smaller 
scale,  within  the  village,  the  province,  the 
nation.  It  is  only  disputed  when  it  is 
sought  to  apply  it  to  the  wider  co-operation 
of  men  and  businesses  in  the  w^orld  at  large. 
There  are  one  or  two  errors,  common  to 
'  all  Protectionist  proposals,  fundamental  in 
their  character,  which  need  to  be  exposed 
in  the  outset  of  every  discussion  of  the 
subject. 

'JQie  first  is  the  presentation  of  nations  as 
trading  firms.  Great  Britain  is  treated  as  if 
she  did  business,  in  her  corporate  capacity, 
with  Germany  or  the  United  States.  The 
several  commercial  countries  are  also  re- 
garded as  competing  with  one  anotiier  for 
trade  with  other  countries.  Neither  of  these 
views  is  correct.      Great   Britain  does   not 


THE  REVIVAL  OE  PROTECTIONISM      3 


trade  witli  Germany ;  individual  Britons 
trade  with  individual  Germans,  buying  from 
them  and  seUing  to  them,  just  as  they  do  in 
the  case  of  fellow- Britons,  each  party  seek- 
ing and  finding  his  private  gain  from  each 
transaction.  It  is,  of  course,  possible  to 
add  together  all  these  separate  acts  of  sale 
and  purchase  which  take  place  between 
members  of  the  different  nations,  and  put 
them  under  the  collective  title  British  trade, 
German  trade,  American  trade.  Our  Board 
of  Trade  returns  do  this,  thus  unintention- 
ally conveying  the  suggestion  that  there  is 
something  different  in  the  economic  nature 
and  value  of  overseas  trade  and  purely 
domestic  trade. 

If  this  suggestion  that  Great  Britain  as  a 
nation  trades  with  Germany  and  the  United 
States  is  a  mischievous  falsehood,  still  more 
mischievous  is  the  suggestion  that  they  are 
hostile  competitors  for  trade  with  other 
countries.  For  this  is  a  double-barrelled 
falsehood.  The  first  falsehood  is  tlie  per- 
version of  the  actual  fact  that  the  competi- 


THE  NEW  PROTECTIONISM 


tion  for  business,  either  abroad  or  at  home, 
is  usually  far  keener  and  more  continuous 
between  different  British  firms  or  different 
German  and  American  firms  among  them- 
selves than  it  is  between  a  British  firm  and 
a  German  or  an  American  firm.    The  second 
falsehood  is  the  misrepresentation   of  such 
commercial  competition  as  a  struggle   be- 
tween two  nations  for  a  limited  amount  of 
profitable   foreign    market,   which    the   one 
gains  and  the  other  loses.     There  is  no  such 
absolute  limit   to   the   quantity  of  foreign 
market.     The  notion  that  the  expansion  of 
foreign  markets  obtained  within  the  last  two 
decades  by  German  or  American  traders  is 
a  corresponding  loss  of  markets  to  British 
traders  is  sheer  nonsense.    To  a  large  extent 
those  markets  were  "  created  "by  the  special 
economic  and  commercial  activities  of  the 
German  or  American  trader.     For  the  rest, 
an  enlargement  of  our  foreign  markets  which, 
in  default   of  German   or  American  com- 
petition,   mi^ht    have    taken    place,    would 
have  iuA^olved  a  diminution   of  our   home 


THE  REVIVAL  ()E  PKOTECTIONIS.Al       5 


markets.  There  is  no  evidence  that  the 
advance  of  German  or  American  foreign  trade 
has  caused  productive  power  in  this  country 
to  remain  idle  to  any  larger  extent  than 
when  we  were  ''  the  workshop  of  the  world." 

Sane  consideration  of  the  nature  of  com- 
merce compels  us  to  deny  that  the  increased 
commerce  of  Germans  or  Americans  has 
reduced  the  ai^orerrate  market  for  British 
goods. 

This  treatment  of  nations  as  trading  units 
is  the  first  item  of  the  series  of  separatist 
fallacies  upon  which  Protectionism  old  and 
new  relies. 

The  second  is  the  separation  of  the 
interests"'  oi  the  seller  from  those  of  the  buyer, 
and  the  false  assertion  that  the  interests  of 
the  former  are,  or  ought  to  be,  superior. 

The  reason  why  Protectionism  appeals  to 
the  producer  and  ignores  the  consumer  is 
evident.  Every  man  contains  within  the 
limits  of  his  own  person  the  whole  economy 
of  world  co-operation  and  exchange  i/i  petto. 
As  producer  he   makes   a  large  surplus  of 


6  THE  NEW  PROTECTIONISM 


some   one   particular    sort    of    goods,    and 
exchanges    this  surplus   against  an   infinite 
number  of  bits  of  surpluses  of  various  kinds 
made  by  other  specialized  producers  in  all 
parts  of  the  world.     As  producer  he  is  one  ; 
as  consumer  he  is  many.      Now,  as  the  pro- 
ductive side  of  his  life  absorbs  the  greater 
part  of  his  conscious  organized  energy  and 
attention,  he  comes  to  think  it  more  impor- 
tant, and  to  regard  it  as  severed  in  its  nature 
from  the  consuming  side.     He  looks  more 
closely  to  the  amount  of  money  he  receives, 
as  profit  or  wages,  than  to  the  prices  of  the 
goods  upon  which  he  expends  that  money. 
This  habitual  separation  of  his   producing 
from   his  consuming  self,  and  the  superior 
conscious  stress  upon  the  former,  give  the 
Protectionist   his   opportunity.     He  makes 
his  separate  appeal  to  the  man  as  producer, 
tells  him  that  selhng  is  more  important  than 
buying,  and  that  the  money  he  receives  is 
more  important  than  what  he  can  buy  with  it. 
It   is  through  consumption  that  the  co- 
operative nature  and  value  of  commerce  is 


THE  REVIVAL  OF  PROTECTIONISM      7 


realized.  Production  divides,  consumption 
unites.  Hence  the  appeal  of  the  Protec- 
tionist to  the  nation  as  a  body  of  pro- 
ducers. 

For,  when  the  Protectionist  has  once 
succeeded  in  getting  the  gain  of  the  pro- 
ducer accepted  as  the  sole  test  of  sound 
economy,  he  is  enabled  to  pursue  his  separatist 
tactics  farther.  He  can  appeal  to  a  nation, 
not  as  a  corporate  union  of  producers,  but  as 
a  number  of  separate  producing  groups.  He 
can  take  each  particular  trade,  or  each 
locality,  and  invite  it  to  consider  whether  a 
tariff  upon  the  importation  of  the  articles 
which  this  trade  or  this  locality  produces 
would  not  be  beneficial  to  these  producers, 
wliether  they  be  capitalists  or  workers.  This 
so-called  "  practical "'  test  of  an  appeal  to  local 
business  interests  appears  at  first  sight  in- 
controvertible. If  Bradford  could  get  high 
import  duties  upon  woollen  goods  enter- 
ing this  country,  it  would  have  a  monopoly 
of  tlie  home  market,  without  losing  any 
foreign    market    it    was    able     to     supply. 


■  Win«»»—— — ^»Mp— ■mjt.wiu.w  iiii.H  »»'■■'» 


8  THE  NEW  PROTECTIONISM 

Similarly  with  Sheffield  cutlery,  with  North- 
ampton boots,   or  with  any  other  local  or 
national  industry.     It  is  easy  to  show  how  a 
tariff  can  do  good  to  each  of  them,  taken 
separately.     '  *  But,"  argues  the  Protectionist, 
"  a  policy  which  can  be  shown  to  be  good  for 
each  must  surely  be  good  for  all."     This,  of 
course,  is  the  central  fallacy.     If  the  Brad- 
ford weaver  gets  Protection  and  nobody  else, 
he  stands  to  gain.     But  if  all  the  other  British 
trades,     local     and     national,     engaged     in 
making  articles  he  needs  in  his  trade — e.g.^ 
wool,  coal,  machinery,  dyes,  etc. — or  articles 
of  food,  clothing,  furniture,  etc.,  on  which  he 
spends  his  wages,  also  get  Protection,  each 
duty   to   protect  those  other  trades  filches 
from  him  a  bit  of  the  gain  he  stood  to  make 
if  the  Bradford  woollen  trade  were  alone 
protected.     A  general  tariff  protecting   all 
British  trades  equally  would  thus  be  found 
to  make  so  many  deductions  from  the  value 
of  the   special   Protection   enjoyed  by  the 
woollen  trade,  as  to  convert  it  from  a  gain 
into  a  loss.     The  higher  prices  of  woollens 


THE  REVIVAL  OF  PROTECTIONISM      9 


which  his  Protection  enabled  him  to  get 
would  be  outweighed  by  the  added  higher 
prices  of  the  various  articles  required  for  use 
in  his  trade  and  for  his  private  consumption. 
This  appeal  to  the  separate  interests  of  each 
trade  is  sometimes  known  as  "  the  distribu- 
tive fallacy."  It  consists  in  arguing  tliat 
what  is  true  of  each  must  be  true  of  all.  It 
is  well  illustrated  in  the  hortatory  method 
in  vogue  in  American  schools,  where  upon 
the  Fourth  of  July  the  boys  assembled  are 
reminded  tliat  every  one  present  is  capable 
of  becoming  President  of  the  United  States, 
though  it  is  evidently  impossible  that  more 
than  about  ten  in  the  whole  country  can 
attain  the  position. 

The   whole   economics   of    Protection   is  \ 
thus  seen  to  be  rooted  in  the  soil  of  separa- 
tism, disruption,  and  antagonism.    Its  policy 
is  realized  in  a  number  of  conflicting  prefer- 
ences  and   pulls,   that  of  producer   against  \ 
consumer,     trade     against     trade,     locality   / 
against  locality,  capital  against  labour,  land 
against    both,    and,    lastly,    nation    against  \ 


c 


10  THE  NEW  PROTECTIONISM 

I  nation,  falsely  represented  as  economic 
I  corporations.  At  every  point  of  cleavage 
\  damage  is  wrought  upon  the  economy  of 
j  human  co-operation  for  the  production,  dis- 
tribution, and  exchange,  of  wealth. 

But,  it  may  well  be  asked,  how  has  Pro- 
tection been  able  to  make  so  much  way 
against  the  forces  of  reason  and  collective 
self-interest  ?  How  have  separate  group- 
interests  succeeded  in  imposing  a  protec- 
tive system  in  so  many  countries,  and  how 
are  they  able  in  this  country  to  set  on  foot 
a  powerful  movement  to  overthrow  the 
established  fiscal  system  of  Free  Trade  ? 

The  history  of  the  last  half-century  con- 
denses into  a  few  brief  lessons  the  forces  and 
conditions  which  have  enabled  certain  par- 
ticular business  interests  within  a  country 
to  impose  tariffs  detrimental  to  the  economic 
interests  of  the  nation  as  a  whole.  The  un- 
equal organization  of  the  several  business 
interests  within  a  nation  for  co-operative 
work  in  the  field  of  politics  is  of  prime  im- 
portance.     Modern   capitalist  development 


/-^ 


THE  REVIVAL  OF  PROTECTIONISM     11 


has  everywhere  given  prominence  to  certain 
staple  manufactures  in  textiles  and  metals, 
etc.,  which,  by  reason  of  their  widespread 
utility  and  importance,  assumed  the  chief 
role  in  foreign  trade.  It  was  natural  that 
whatever  aids  Government  could  render  to 
these  wealthy,  concentrated,  enterprising 
trades,  by  way  of  safeguarding  for  them  the 
possession  of  their  domestic  markets  wherever 
seriously  threatened,  and  of  obtaining  new 
foreign  markets,  should  become  objects  of 
political  endeavour  among  the  members  of 
these  trades.  To  these  staple  textile  and 
metal  trades  other  important  capitalist  in- 
dustries have  sometimes  attached  them- 
selves— e.g.,  shipbuilding  and  shipping, 
chemicals,  leather,  etc. — bringing  organized 
political  pressure  on  their  national  Govern- 
ment to  get  tariff  protection,  bounties,  rail- 
road facilities,  and  various  diplomatic  and 
other  political  assistance  in  winning  foreign 
markets.  If  the  members  of  a  few  strong 
national  trades  can  exercise  a  series  of  special 
pulls  in  the  construction  of  a  tariff,  or  the 


12  THE  NEW  PROTECTIONISM 

pursuance  of  an  expensive  or  risky  foreign 
policy  adapted  to  their  trade  ends,  the  good 
of  the  nation  as  a  whole,  represented  by  a 
weak,  diffused  and  ill-sustained  opposition  to 
their  strong,  concentrated  and  persistent 
policy,  is  likely  to  go  to  the  wall.  This  has 
been  the  story  of  the  rise  and  progress  of 
Protectionism  in  all  the  countries  where  it 
has  made  way  in  recent  times. 

The  strong  organized  trades  have  waited 
for,  fostered,  and  utilized,  special  political 
emergencies  in  the  history  of  their  countr}^ 
Wars  and  their  financial  aftermath  have 
been  the  most-favoured  emergencies.  The 
financial  embarrassment  wars  cause  to 
Governments,  coupled  with  the  reluctance 
of  statesmen  to  resort  to  the  unpopular 
methods  of  a  heavy  increase  of  direct 
taxation,  have  commonly  afforded  the  op- 
portunity to  the  waiting  Protectionists. 
The  modern  Protectionist  policy  of  the 
United  States  was  a  direct  legacy  of  the 
Civil  War.  Before  that  event  the  United 
States  tariffs  had  been  tending  towards  Free 


THE  REVIVAL  OF  rilOTECTIONISM     13 


Trade,  the  general  level  of  the  Act  of  1857 
being  lower  than  that  of  any  period  since 
181(5.      xVfterwards,    the    Constitution   not 
permitting   of  an   income-tax,    high  tariffs 
were  imposed,  at  first  accompanied  by  ex- 
cise duties  ;    soon    the   excise   duties    were 
withdrawn  and  the  import  duties  remained. 
The  high  Protection  of  France  and  Ger- 
many is  attributable   to   similar   causation, 
the  pressure  of  war  debts  and  fresh  expendi- 
ture for  armaments  offering  the  Protectionist 
interests  their  opportunity.     The  return  to 
high  Protection  by  France  in  1875,  and  in 
Germany  a  few  years  later,  was  not,  indeed, 
wholly  due  to  fiscal  needs.     Trade  depres- 
sion  and   unemployment,    attributed    to   a 
dinnping   policy   of   British    manufacturers, 
helped  the  movement  towards  a  "  national 
economy,"    the    patriotic    mask    of    naked 
business  interests.     In    both    countries   the 
textile  and  metal  trades  were  compelled  to 
work  in  conjunction  with  the  agricultuial 
interest.     This  was  due  in  Germany  to  the 
sur\  ival  of  the  feudal  power  of  the  land- 


riMaXXIH«aMH'9V*MW«EHHMHSUKMP  .jaMWi  IILJU«WiM>  ~^^-~^ 


14  THE  NEW  PROTECTIONISM 

niinrniim  ■■■■■■■■■■mM«««mn»--«irmTMTTiTrMrrTrr«TfBri«^nTMMni^wM«i-nrT-ri 1 

owning  class  in  the  Government,  especially 
of  Prussia  ;  in  France  to  the  widespread  but 
very  strongly  defined  influence  of  the  great 
peasant  electorate.  This  "  balance  of  power  " 
between  two  economic  forces  of  producers, 
naturally  opposed  to  one  another,  has  brought 
about  curious  fluctuations  and  compromises 
in  the  protective  policy  of  the  two  countries  ; 
but  upon  the  whole  it  has  worked,  politically, 
for  the  maintenance  and  elevation  of  tariffs. 
But  this  seizure  of  special  financial  and 
economic  opportunities  is  not  a  full  explana- 
tion of  the  success  of  the  Protectionist 
movement.  The  whole  tenor  of  political 
history,  with  its  excessive  emphasis  upon 
the  nation  as  the  limit  of  sympathy  and 
corporate  obligation  for  the  citizen,  and 
upon  the  opposing  interests  and  struggles 
between  nations,  has  furnished  an  education 
and  an  emotional  atmosphere  favourable  to 
the  acceptance  of  Protectionists'  ideas  of 
national  economy.  In  such  an  atmosphere, 
even  during  times  of  peace,  it  has  been  easy 
to  impose  on  the  common  mind  notions  and 


C4f 


THE  REVIVAL  OF  PROTECTIONISM     15 


language  which  present  trade  in  terms  of 
international  hostility.     England,  Germany, 
the   United   States,  are  rivals,  fighting   for 
markets,  and  taking  markets  that  "  belong  " 
to  "  our  nation,"  "  stealing  marches  "  upon 
us,    and   otherwise    seeking    to    injure   our 
trade.     When  within  each  State  some  group 
of  business   interests  actually  controls   the 
foreign  and    fiscal   policy,  it    does  actually 
produce,  by  tariffs,  shipping  laws,  commercial 
treaties,    and    a   pushful    colonial   policy,    a 
sufficient  semblance  of  economic  mihtarism  to 
give  plausible  support  to  this  fundamentally 
false  conception  of  international  trade.   There 
does  exist  this  real  opposition  between  trad- 
ing   and    financial    groups    and    syndicates 
within    the   several    nations,  which    bv  im- 
pudent  misuse  of  language  and  of  politics 
usurp    the   title  of  their  respective  States. 
So  France,  Great  Britain,  Germany,  America, 
and  Japan,  may  easily  be  represented  as  op- 
posed to  one  another,  in  their  national  capacity, 
in  a  contest   for   trade  and  concessions    in 
China,   wlien   the   trutli    is    that   some   tiny 


16  THE  NEW  PROTECTIONISM 

little  knot  of  pushful  merchants  or  bankers 
in  each  country,  with  or  without  the  assist- 
ance of  their  Foreign  OfFce,  are  the  actual 
contestants. 

If  this  is  the  normal  modern  situation,  it 
is  easy  to  understand  how  the  military  policy 
of  States,  the  preparations  for  war,  the  con- 
duct of  war,  and  the  sequelae  of  war,  play 
into  the  hands  of  Protectionists.  In  a 
dangerous  world,  where  a  nation  is  exposed 
to  have  its  foreign  trade  cut  off  during  war, 
common  prudence,  it  is  held,  must  impel  the 
State  to  make  arrangements  enabling  the 
nation  to  be  as  self-sufficing  as  possible  in 
supplies  of  the  requisites  of  civil  existence 
and  military  use.  A  protective  tariff  is 
advocated  as  a  chief  instrument  for  achieving 
this  "national  economy."  So  Protection  is 
urged,  not  as  an  instrument  of  national 
wealth,  but  of  national  defence.  In  con- 
tinental Europe  this  consideration  has  been 
paramount  in  modern  times,  when,  with  the 
growth  of  population  and  improved  facilities 
of  transport,  the  people  of  one  country  might 


THE  REVIVAL  OF  PROTECTIONISM     17 

drift  into  a  dangerous  dependence  on  the 
people  of  adjoining  countries  for  some  neces- 
sary supplies.  The  fear  lest  war  might  cut 
them  off  from  necessary  foreign  markets  has 
been  a  weapon  of  immense  value  to  the 
Protectionist  interests  in  Germany,  France, 
and  other  countries  with  potential  enemies 
across  their  frontiers. 


CHAPTER  II 

DEFENCE  AND  OPULENCE 

In  this  country  the  revival  of  Protectionism 
is  seen  to  be  the  immediate  fruit  of  war 
and  mihtarism.  Groups  of  our  traders,  ex- 
posed to  growing  foreign  competition  in  this 
country  and  in  the  markets  of  the  world, 
had  long  striven  to  plant  a  protective  tarift 
for  British  manufacturers  upon  the  formal 
programme  of  the  Conservative  party.  The 
landowners  and  farmers,  injured  by  the  long- 
continued  fall  of  food  prices,  also  brought 
what  political  pressure  they  could  towards 
the  protection  of  "  the  agricultural  interests." 
But  Free  Trade  had  been  too  long  a  settled 
fiscal  policy  in  this  country  to  be  easily  dis- 
turbed ;  the  difficulties  of  reconciling  manu- 
facturing with  agricultural  Protection  were 
too   evident ;    ''  food   taxes "  were   too   un- 


ill 


EFENCE  AND  OPULENCE  19 


popular  an  electoral  cry ;  periods  of  trade 
depression  and  unemployment,  the  one  real 
liope  of  our  Protectionists,  were  not  long 
enough  or  bad  enough  to  serve  the 
purpose. 

The  Boer  AVar  brought  into  play  new 
jemotional  forces  and  a  financial  situation 
which  seemed  fa\'ourable  for  Tariff'  Reform. 
The  war-borrowing  left  a  larger  indebted- 
ness, and  the  new  naval  programme,  taken 
in  conjunction  with  the  costs  of  long-due 
social  reforms,  like  old-age  pensions,  brought 
a  pressure  on  the  public  revenue  which  gave 
plausibility  to  any  scheme  for  "  broadening 
the  basis  of  taxation."  The  rally  of  Im- 
perialist sentiment  in  our  self-governing 
dominions  and  their  active  support  in  the 
war  gave  a  new,  passionate  emphasis  to  the 
notion  of  a  self-sufficing  Empire  bound 
together  by  a  system  of  mutually  prefer- 
ential tariffs.  The  bitter  criticism  of  our 
policy  upon  the  Continent,  and  the  threats 
of  concerted  intervention  in  favour  of  the 
Boer  Republics,  left  in  our  people  a  powerful 


20  THE  NEW  PROTECTIONISM 


anti-foreigner  sentiment  obviously  useful  as 
grist  to  the  Protectionist  mill. 

Mr.  Chamberlain  and  his  Tariff  Reformers 
were  right  in  thinking  the  time  favourable 
for  their  project.  But  it  was  not  favourable 
enough.  The  financial  solution  was  not 
grave  enough  ;  the  industrial  depression  did 
not  respond  to  expectations ;  the  sentiment 
of  Imperial  unity  was  too  vague ;  the  ad- 
vantages of  good  business  relations  with 
foreign  countries  were  too  obvious ;  cheap 
food  was  too  evidently  advantageous  to  the 
working  classes.  Again,  the  Tariff  Re- 
formers did  not  get  in  their  work  in  time. 
The  glamour  of  militarist  exploits  had 
already  faded,  the  debauch  had  left  the 
country  with  a  headache  and  the  bill.  The 
advocates  of  Protection  in  1903  and  the 
following  years  were  unable  to  substitute 
sentiment  and  passion  for  reasoning  and 
calculation.  Hard  facts  and  the  logic  of 
the  situation  told  too  heavily  against  them. 
To  persuade  the  nation  that  its  trade  was 
going  to  the  dogs  when  common  experience 


DEFENCE  AND  OPULENCE  21 


and  official  records  proved  tlie  contrary,  to 
persuade  the  mass  of  busy  workers  that 
tariffs  were  needed  to  cure  unemployment, 
and  that  if  they  did  pay  more  for  their  food 
they  would  get  it  back  in  other  ways,  proved 
too  difficult  a  task. 

The  trouble  in  this  earlier  Protectionist 
campaign  was  that  the  trade  interests  operat- 
ing it  found  the  sentimental  Imperialism, 
patriotism,  and  militarism  deficient  in 
volume  and  intensity  to  serve  their  pur- 
pose. They  were  forced  into  argument, 
and  therefore  beaten.  Our  New  Protec- 
tionists, having  a  far  greater  and  more 
various  fund  of  sentiment  and  passion  at 
their  disposal,  hope  to  avoid  close  economic 
controversy,  or  at  any  rate  to  reduce  it  to  a 
wholly  subordinate  place  in  their  campaign 
for  tariffs.  They  have  learnt  this  lesson. 
They  will  no  longer  find  it  necessary  to 
prove  that  Protection  raises  wages,  enlarges 
and  secures  employment,  conserves  and 
develops  the  natural  resources  of  the  country, 
directs   foreign    trade   into  more   profitable 


2^  THE  NEW  PROTECTIONISM 


channels,  and  performs  the  other  economic 
miracles  claimed  for  it  by  its  advocates, 
'i'hese  notions  are  doubtless  still  cherished 
by  "  true  believers,"  but  they  are  no  longer 
needed  for  missionary  work  among  "the 
heathen."  Free  Traders,  or  indifFerents,  are 
to  be  converted  by  quite  a  different  appeal. 
That  appeal  is  skilfully  addressed  to  them  in 
the  admission  of  the  great  prophet  of  Free 
Trade,  Adam  Smith  himself,  that  ''  Defence 
is  much  more  important  than  Opulence." 
In  other  words,  we  are  adjured  to  admit 
that  mere  quantity  of  wealth,  mere  volume 
of  trade,  mere  cheapness,  may  be  rightly 
sacrificed  to  the  higher  considerations  of 
national  or  Imperial  strength  and  security. 

Now  the  truth  of  this  general  statement 
is  indisputable.  The  emergencies  of  the 
war  have  furnished  various  illustrations  of 
proper  and  necessary  interferences  with 
liberty  of  trades  in  the  higher  interest  of 
national  security.  It  has  been  deemed  desir- 
able to  restrict  or  prohibit  certain  imports,  so 
as  to  reduce  the  consumption  of  luxuries, 


DEFENCE  AND  OPULENCE  i2,S 


liberate  labour  for  useful  services,  economize 
shipping,  and  strengthen  the  foreign  ex- 
changes, to  say  nothing  of  the  regulation 
and  restriction  of  our  export  trade  in  order 
to  conserve  certain  supplies  for  our  own  use 
or  to  prevent  other  supplies  falling  into  enemy 
hands.  Except  as  regards  the  detailed 
operation  of  the  restrictions  upon  imports, 
Free  Traders  have  fully  acquiesced  in  these 
emergency  measures. 

But  when  they  are  asked  to  admit  that, 
after  the  military  warfare  is  concluded  and 
*'  peace  "  is  made,  it  will  be  desirable  to  have 
in  being  for  future  "defence"  against  the 
power  of  Germany  an  elaborate  tariff,  con- 
firming and  continuing  the  several  political 
and  military  cleavages  which  the  war  has 
brought  about,  and  that  tliis  tariff  should  be 
prepared  during  the  war,  they  ought  to 
apply  close  tests  of  reason  before  giving 
their  assent  to  such  proposals.  ^Vhat  is  the 
value  of  the  suggested  opposition  between 
''  Opulence  "  and  *'  Defence  "?  A  tariff  will 
certainly  reduce  Opulence.     Hut  will  it  im- 


24  THE  NEW  PROTECTIONISM 


prove  Defence  ?  And  are  not  safer  and 
better  economic  defences  available  ?  These 
are  the  questions  to  be  answered. 

Let  it  be  admitted  that,  if  a  nation  has  to 
choose  between  Opulence  and  Defence,  it 
will  do  well  to  prefer  the  latter.  But  we 
must  first  have  evidence  that  the  opposition 
exists  and  that  the  choice  is  necessary. 
Regarded  prima  facie.  Opulence  is  favour- 
able, not  adverse,  to  Defence.  Povertv  is 
not  strength.  Money  is  the  sinews  of  war, 
as  we,  better  than  any  other  country,  ought 
to  know.  If,  therefore,  we  are  to  follow  a 
course  which  reduces  Opulence,  we  must  be 
clear  that  this  prima  facie  damage  is  more 
than  offset  by  other  items  of  Defence. 

What  are  the  dangers  after  the  war 
against  which  a  tariff  will  provide  ?  Need- 
less to  dwell  upon  the  preposterous  story  of 
the  huge  stocks  of  goods  (£300,000,000  in 
value,  an  adventurous  statistician  calculates  !) 
which  German  manufacturers  and  merchants 
have  already  stored  for  "  dumping  "  on  the 
markets   of  this   country    and    of    Fitance 


DEFENCE  AND  OPULENCE  25 


directly  the  war  is  over,  in  order  to  kill  any 
revival  of  our  trade.  How  Germany  can 
spare  from  the  remnants  of  her  industrial 
population  the  labour  needed  to  perform 
this  feat,  what  harm  it  would  do  if  Germany 
could  send  in  cheap  stocks  at  a  time  when 
our  stocks  and  those  of  the  commercial 
world  will  be  depleted,  what  sort  of  goods 
Germany  would  take  in  payment,  and, 
finally,  what  shred  of  evidence  exists  to 
support  the  silly  fable — these  probings  must 
suffice  for  the  "  dumping  "  argument. 

A  more  plausible  case  for  economic  "  de- 
fence "  on  the  part  of  Great  Britain  and  her 
Allies  is  made  by  dwelling  upon  the  con- 
structive and  aggressive  measures  of  trade 
which  the  Central  Empires  may  employ. 
The  assumption  is  that  an  unrepentant  and 
revengeful  Germany  will  direct  all  her  efforts 
to  the  work  of  industrial  recuperation  and 
expanding  trade  with  three  related  objects : 
first,  the  recovery  of  her  internal  economic 
strength  in  order  to  be  rich  enough  to  pre- 
pare for  another  war  ;   secondly,  the  com- 


26  THE  NEW  PROTECTIONISM 

mercial  and  financial  penetration  of  foreign 
countries,  including  our  Empire,  so  as  to 
wrest  from  us  our  trade  supremacy  ;  thirdly, 
the  establishment  at  home  or  abroad  of 
monopolies  of  certain  sources  of  supply  or 
processes  essential  for  war  purposes  or  for 
the  control  of  vital  industries. 

In  order  to  meet  this  aggressive  policy  we 
are  to  set  up  a  tariff  which  shall  (1)  make 
Great  Britain  less  dependent  than  formerly 
on  outside  supplies  in  war  and  peace ;  (2)  bind 
the  Empire  in  a  closer  economic  unity ;  (3)  so 
strengthen  the  trade  and  financial  relations 
among  the  Allies  as  to  make  the  Alliance 
a  virtually  self-sufficing  economic  system  ; 
(4)  boycott  the  trade  of  the  Central  Powers. 
It  is  right  to  add  that  a  tariff  is  not  to  be 
the  sole  instrument  of  economic  defence.  It 
is  to  be  supported  by  navigation  laws,  reforms 
of  the  Company  and  Patents  Acts,  and  a 
complete  Stock  Exchange  boycott,  etc. 

But  the  tariff  is  the  main  weapon.  Now, 
its  defensive  efficacy  may  be  submitted  to 
two  tests.     Does  it  strengthen  the  position 


DEFENCE  AND  OPULENCE  27 

of  this  country  in  the  event  of  another  war  ? 
Does  it  render  less  likely  or  more  likely  the 
occurrence  of  another  war  ? 

I^et  us  here  consider  the  first  test. 

AX'ill  the  operation  of  such  a  tariff  as  is 
contemplated  injure  the  power  of  Germany 
to  pursue  the  aggressive  economic  policy 
imputed  to  her  ?  She  desires  to  build  up 
strong  internal  industries,  to  push  for  foreign 
markets  and  a  part  in  the  development  of 
backward  countries,  and  for  the  possession 
or  control  of  **  key  "  industries.  Xow,  it  is 
evident  that,  if  she  could  be  cut  off  from  all 
trade  and  other  economic  relations  with  this 
country,  our  Empire,  and  the  dominions  of 
our  Allies,  a  large  part  of  the  world  would 
be  closed  to  her,  and  she  would  suffer.  But 
would  the  general  injury  inflicted  on  her 
home  industry  and  her  foreign  trade,  and  so 
upon  the  general  growth  of  wealth  of  the 
German  nation,  be  an  advantage  either  to 
this  country  or  to  the  Alhance  for  purposes 
of  defence  ?  Surely  not,  if  it  weakens  us  as 
much  as   it  weakens  our   potential  enemy. 


28        thp:  new  protectionism 


And  is  it  not  a  just  assumption  that  the 
stoppage  of  trade  between  two  nations,  or 
groups  of  nations,  injures  or  weakens  both 
equally  ?  I  know  that  there  are  those  who 
think  that  in  the  past  the  Germans  have 
gained  more  from  trade  with  us  than  we 
have  from  trade  with  them.  By  this  they 
generally  mean  that  our  imports  from  Ger- 
many were  much  larger  than  our  exports  to 
Germany.  In  1913  did  we  not  receive  from 
Germany  goods  to  the  value  of  80  milhons, 
whereas  we  sold  to  Germany  only  40  millions 
of  British  produce  and  20  millions  of  colonial 
and  foreign?  There  exists  a  curious  belief 
that  Germany  got  the  advantage  of  us  in 
this  transaction.  The  presumption  surely 
ought  to  be  the  other  way.  For  if  we  had 
really  received  80  millions'  worth  of  goods, 
and  paid  in  return  no  more  than  60  millions' 
worth,  the  "pull"  would  surely  have  been 
ours.  In  point  of  fact,  of  course,  we  paid 
in  exports  of  goods  or  services,  either  directly 
to  Germany  or  to  other  countries  on  her 
behalf,  the   full    80   milKons.     Apart   from 


DEFENCE  AND  OPULENCE  29 


this  necessity  of  trade  balance,  there  is  no 
ground  for  the  behef  that,  because  Germany 
sells  us  directly  more  than  she  buys  from 
us,  she  is  the  greater  gainer.  Our  Protec- 
tionists speak  of  our  "  foolish  generosity  "  in 
opening  our  markets  to  our  enemy,  who  has 
built  up  her  commercial  prosperity  upon 
our  amiable  weakness  !  But  has  any  busi- 
ness firm  or  individual  trader  in  this  country 
bought  from  Germany  except  for  his  own 
gain  ?  It  never  occurred  to  him  that  he 
was  acting  generously  because  he  was  buying 
where  he  reckoned  to  get  the  best  value. 
The  notion  that  export  trade  is  worth  more 
than  import  trade  is  nothing  but  a  false 
exaggeration  of  the  producer's  standpoint. 

Another  form  of  the  same  error  is  con- 
tained in  the  belief  that  it  would  injure  the 
Central  Powers  much  more  to  be  cut  off 
from  trade  with  the  British  Empire  and  the 
entire  territories  of  the  Alliance  than  for  the 
latter  to  lose  their  trade  with  the  Central 
Powers.  This  no  doubt  would  be  the  case 
if  the  wliole  world  consisted  of  these  two 


30  THE  NEW  PROTECTIONISM 


economic  groups.  It  would  be  easier  for 
the  Allies,  with  their  empires,  to  make  of 
themselves  a  wholly  self-contained  economic 
system  than  for  the  Central  Powers.  But 
this  is  not  the  real  problem.  It  ignores 
the  importance  of  the  neutral  world,  and 
the  processes  of  "  roundabout"  trade.  If  the 
effect  of  tariff  walls  round  Great  Britain, 
the  Empire,  and  the  Alliance,  is  to  make  our 
trade  relations  with  the  neutral  countries 
more  difficult,  and  the  trade  relations  of 
Germany  with  the  neutral  countries  easier, 
the  net  result  may  be  damaging  and 
dangerous.  Now,  this  is  precisely  what  would 
happen.  Neither  the  British  Empire  nor  the 
larger  system  of  the  Alliance  can  supply  all 
their  economic  needs  from  their  own  terri- 
tory. They  must  continue  to  be  dependent 
on  import  and  export  trade  with  neutral 
countries,  especially  in  North  and  South 
America,  for  important  foods  and  raw 
materials  essential  to  their  vital  industries. 
Although  the  Empire  furnishes  a  large 
share  of  our  imported  foods,  more  comes 


DEFENCE  AND  OPULENCE  81 


from  foreign  countries.  In  1913  we  drew 
05 i  million  Imndredweight  of  wheat  and 
wheat  Hour  from  foreign  countries  as  against 
57  miUions  from  the  Empire.  In  some 
years  the  Imperial  contribution  is  much 
smaller.  In  1908,  for  instance,  the  simul- 
taneous failure  of  crops  in  Austraha  and 
India  made  us  dependent  for  three-quarters 
of  our  imports  upon  foreign  countries.  For 
some  raw  materials  of  our  staple  trades 
our  dependence  upon  foreign  countries  is 
absolute.  Take,  for  example,  cotton.  The 
Imperial  supply  in  1913  amounted  to 
only  71,915,000  pounds,  as  compared  with 
2,102,384,000  pounds  from  foreign  sources. 
But  what  of  that,  it  may  be  said  ?  We 
shall  still  continue  in  our  present  amicable 
trade  relations  with  the  neutral  countries. 
They  will  still  buy  our  goods  and  sell  us  theirs 
as  before.  But  will  they  ?  One  inevitable 
effect  of  our  tariff  system  would  be  to  damage 
our  trade  with  the  great  neutral  markets  and 
to  improve  the  trade  of  dermany  with  them. 
Two  forces  would  co-opcratc  to  this  result. 


32  THE  NEW  PROTECTIONISM 


German  manufacturers  and  merchants,  cut 
off  from  our  markets  and  those  of  our  Alhes, 
would  be  driven  to  cultivate  more  assiduously 
than  before  the  markets  left  to  them.  To 
adopt  the  language  of  our  Protectionists, 
these  neutral  countries  v^ould  become  their 
**  dumping-grounds,"  and  the  competition 
of  these  "dumped"  German  goods  would 
undersell  our  honest  wares.  But  this  is  not 
the  worst.  The  high  tariff  duties  which  we 
should  have  to  put  on  goods  from  neutral 
countries,  in  order  to  protect  our  own 
produce  and  to  give  preferences  to  our 
Dominions  and  our  Allies,  would  give  grave 
offence  to  neutral  countries  whose  goods  we 
have  always  hitherto  admitted  free.  Retali- 
ating on  our  conduct,  they  would  no  longer 
give  us  most-favoured-nation's  treatment. 
Germany,  not  being  hampered  by  so  complex 
a  tariff,  and  being  under  urgent  pressure  to 
*'make  up  to"  neutrals,  would  clearly  be  in 
a  position  to  negotiate  trade  treaties  with 
powerful  neutrals  like  the  United  States  and 
the  countries  of  South  America  upon  mor 


DEFENCE  AND  OPULENCE     3i3 


favourable  terms.  We  should,  by  thus  turn- 
ing over  the  neutral  markets  more  largely 
to  Germany,  offset  any  advantages  which 
might  seem  to  accrue  to  us  by  setting  up 
the  larger  economic  system  of  the  Alliance 
against  the  smaller  system  of  Central  Europe. 
So  far  as  Great  Britain  is  concerned,  we 
should  be  jeopardizing  some  of  the  essentials 
of  life  and  trade  by  reducing  the  number  of 
separate  sources  of  supply.  Thus  there  is  no 
reason  to  suppose  that  an  effective  economic 
boycott  of  the  Central  Powers  after  the 
war,  even  if  it  could  be  maintained,  would 
injure  them  more  than  it  injured  us,  or,  in 
other  words,  w^ould  add  anything  to  our 
relative  power  of  "  defence." 


3 


CHAPTER  III 

THE  TANGLES  OF  A  TARIFF 

Tariff  Reformers  of  the  last  decade  found 
considerable  difficulty  in  reconciling  the 
claims  of  home  industries  and  Imperial 
preferences,  agrarian  and  manufacturing 
interests,  tariff  for  revenue,  tariff  for  Pro- 
tection, and  tariff  for  retaliation.  To  adjust 
the  respective  interests  of  producers  and 
consumers  within  these  islands  and  the 
Empire  as  purchasers  of  foods,  raw  mate- 
rials, semi-manufactured  and  fully-manufac- 
tured goods,  was  found  by  experience  to 
require  considerable  dexterity.  Yet  this 
task  was  child's  play  as  compared  with  that 
which  awaits  our  New  Protectionists.  For 
upon  this  earlier  scheme  they  are  called 
upon  to  superimpose  the  new  war  pattern 
of  a  world  made  up  of  friends,  enemies,  and 

34 


THE  TANGLES  OF  A  TARIFF  S5 


neutrals,  and  to  harmonize  the  operations  of 
the  new  and  predominant  needs  of  defence 
with  the  national  and  Imperial  interests  of 
the  older  plan. 

A  tariff  that  is  good  for  purposes  of 
*'  defence "  must,  it  will  be  admitted,  be 
framed  so  as  to  fulfil  two  conditions  ;  (1)  It 
must  bind  together  in  unity  and  amity  the 
British  Empire  and  the  Allies  ;  (2)  it  must 
make  this  union  self-sufficing  for  all  the 
essential  requisites  of  war  and  peace.  Does 
the  proposed  tariff  fulfil  these  conditions  ? 
That  tariff  has  to  perform  a  more  difficult 
task  than  any  ever  yet  erected  by  any  State. 
It  has  to  discriminate  between  five  different 
bodies.  It  has,  first,  to  protect  the  industry 
and  agriculture  of  the  British  Isles;  secondly, 
to  give  preferential  treatment  to  the  Empire  ; 
thirdly,  to  cement  the  Alhance  by  mutually 
favourable  tariff  treaties  ;  fourthly,  to  apply 
to  neutral  nations  a  genei'al  tariff;  fifthly, 
to  exclude  enemy  goods,  or  at  least  to  secure 
ourselves  from  dependence  upon  enemies  for 
anything  essential. 


~  :»*mjuugii 


36  THE  NEW  PROTECTIONISM 


But  when  once  the  existing  war  map  of 
the  world  is  taken  as  the  directive  instru- 
ment for  our  future  commercial  policy,  there 
is  no  tendency  to  confine  our  tariff  to  this 
fivefold  discrimination.  So  we  find  pro- 
posals to  distinguish  friendly  from  un- 
friendly neutrals. '  Friendliness,  again,  may 
be  either  in  conduct  as  war  neutrals,  or  in 
ordinary  trade  relations  before  the.  war.  Mr. 
Wickham  Steed,  for  example,  would  have 
this  country  and  the  Allies  discriminate 
between  "  first-class  "  and  "  second-class  " 
neutrals  on  the  basis  of  their  favourable 
or  unfavourable  attitude  during  the  war. 
"  States  which  have  clandestinely  sided  with 
and  helped  the  enemy,  or  have  deliberately 
hampered  the  Allies  during  the  war  ;  peoples 
w^ho,  while  able  to  defend  themselves  against 
eventual  German  aggression,  have  yet  be- 
lieved and  wished  for  the  success  of  German 
arms,  must  be  regarded  as  second-class 
neutrals.'"^     But    I  observe   that  the  draft 

*  "  A    Programme    for     Peace/'     Edinhurgh    Ilcvierv, 
April,  191  (i,  p.  378. 


THE  TANGLES  OF  A  TAUIIT  '61 


tariff  prepared  by  the  Committee  of  the 
London  Chamber  of  Commerce  would  dis- 
criminate in  the  tariff*  treatment  between 
'*  Friendly  Neutrals  (giving  the  United 
Kingdom  most- favoured  treatment)"  and 
''  Other  Neutral  Countries  (those  giving 
preference  to  other  foreign  countries)."  Nor 
is  there  any  reason  why  the  discrimination 
should  stop  here.  Some  neutral  trade  is 
more  important  for  us  than  other  neutral 
trade,  irrespective  of  the  favourable  or  un- 
favourable attitude  such  neutral  Govern- 
ments may  adopt.  Here  is  another  basis 
of  discrimination. 

But  if  we  apply  these  distinctions  to 
neutrals,  why  not  also  to  enemy  countries  ? 
Not  only  do  we  desire  more  earnestly  to 
damage  the  trade  of  Germany  than  that  of 
Hungary,  Bulgaria,  or  Turkey,  but  some 
of  the  imports  of  foods  and  materials  from 
these  countries  are  more  valuable  to  us 
(accepting  the  Protectionist  scale  of  values) 
than   the    manufactured    goods    that   come 


38  THE  NEW  PROTECTIONISM 

from  Germany.  It  would  evidently  be 
advantageous  to  us,  and  disadvantageous  to 
Germany,  for  us  to  exercise  a  less  rigorous 
exclusion  of  imports  from  her  allies  than 
from  herself. 

Indeed,  when  once  business  is  crossed 
with  politics  and  military  considerations, 
there  seems  no  limit  to  the  complexities  of 
the  tariff  discrimination.  A  special  tariff 
for  every  foreign  country,  shifting  with  each 
change  in  the  balance  of  political  and  com- 
mercial considerations,  would  be  the  logic 
of  the  situation.  Some  dim  perception  of 
these  complications  has  made  our  New 
Protectionists  so  shy  of  committing  them- 
selves to  any  close  formal  statement  of  their 
proposals,  that  it  is  not  easy  to  be  certain 
what  they  stand  for.  I  find,  however, 
emerging  from  the  voluminous  discussions 
in  the  Morning  Post  and  the  reports  of 
Chambers  of  Commerce  meetings  a  new 
fiscal  world,  which  may  be  visualized  in 
five  concentric  circles : 


THE  TANGLES  OF  A  TARIFF 


39 


(Lent  by  the  Strand  Engraving  Co.) 

Now,  how  will  it  be  possible  to  devise  a 
tariff  that  shall  harmonize  the  conflicting 
interests  involved  in  this  fivefold  discrimi- 
nation ?  The  following  are  some  of  the 
dangers  involved  in  the  attempt : 

1.  If  we  give  adequate  protection  to 
Great  Britain,  we  risk  offending  and  divid- 
ing the  Dominions.  For  the  revival  of 
British  agriculture  with  a  view  to  increased 
food  production  involves  taxation  of  all 
overseas  supplies.  Tiie  free  market  hitherto 
enjoyed    by  foods  and  materials  from    the 


40  THE  NEW  PROTECTIONISM 


Dominions  will  be  lost.  Whether  this  loss 
is  or  is  not  compensated  by  the  higher 
taxation  put  on  foreign  imports,  it  discrimi- 
nates in  favour  of  British  home  producers 
against  the  Dominions.  Again,  if  a  genuinely 
reciprocal  tariif  arrangement  is  to  ''  bind  " 
the  Empire,  Canada  must  let  in  Bradford 
and  Birmingham  goods  on  genuinely  "pre- 
ferential "  terms.  Will  her  manufacturers 
consent  to  this  ?  The  high  nominal  prefer- 
ence originally  given  was  soon  withdrawn 
wherever  competition  with  Canadian  manu- 
factures was  involved.  The  dependence  of 
Canada  upon  manufactured  imports  from 
the  United  States  has  been  continually 
growing,  and  the  average  rates  of  duties  on 
American  goods  are  lower  than  on  British. 
Will  the  great  Free  Trade  movement  in 
Western  Canada  acquiesce  in  new  tariff 
arrangements  which  raise  the  price  of  agri- 
cultural machinery  from  the  United  States  ? 
It  has  frequently  been  pointed  out  how 
exceedingly  unequal  must  be  the  value  to 
the  different  Dominions  of  any  preferences 


THE  TANGLES  OF  A  TARIFF  41 


accorded  by  this  country.  Canada,  the 
richest,  must  gain  most ;  the  value  to  South 
Africa  upon  such  exports  as  she  sends  must 
be  inconsiderable. 

2.  The  first  effect  of  a  general  tariff  would 
be  to  put  taxes  upon  all  the  imports  from 
our  AUies  that  hitherto  have  come  in  free. 
The  farmers  and  manufacturers  of  France 
and  Belgium,  in  the  depth  of  poverty  and 
struggling  to  recover  from  the  crushing 
effects  of  war,  will  be  met  by  new  barriers 
to  our  markets.  French  wines  must  be 
taxed  higher,  so  as  to  favour  the  produce  of 
Austraha  and  South  Africa.  The  embargo 
already  placed  on  motors  and  their  parts  will 
be  maintained  by  permanent  taxes.  Silks, 
dress  goods,  poultry,  fruits,  and  flowers,  will 
all  be  taxed,  and  it  will  be  cold  comfort  to 
the  French  farmers  and  merchants  to  be 
told  that  other  foreigners,  who  are  not  Allies, 
are  charo^ed  still  more. 

In  France  considerable  alarm  has  already 
been  expressed  in  industrial  and  commercial 
circles  lest  they  should  stand  to  lose  rather 


42  THE  NEW  PROTECTIONISM 

than  to  gain  under  a  British  post-war  tariff. 
The  following  resolution,  passed  by  the 
"  National  Association  for  Economic  Ex- 
pansion," recently  formed  under  the  leader- 
ship of  M.  David- Mennet,  President  of  the 
Paris  Chamber  of  Commerce,  deserves 
attention : 

"  Great  Britain  constitutes  our  principal 
market ;  and  British  public  opinion,  moved 
by  lively  Press  polemics,  seems,  at  least  to 
some  extent,  to  incline  toward  Protectionist 
tendencies.  The  National  Association  thinks 
that  it  is  urgent,  in  regard  to  the  British 
Unionist  thesis,  to  formulate  the  desiderata 
of  France,  and  to  show  clearly  that,  while 
our  sacrifices  in  the  common  struggle  give 
us  special  rights,  the  interest  of  England, 
which  buys  only  to  sell  again  a  half  of  the 
produce  she  takes  from  us,  suggests  that  she 
should  not  set  up  against  that  produce  a 
barrier  which  might  divert  it  into  more 
benevolent  channels."* 

The  same  reasoning  applies  to  Russia. 
The   large   supplies   of  grain   from    Russia 

*  Quoted  in  Daily  Chronicle,  June  9^  19l6. 


THE  TANGLES  OF  A  TARIFF  43 


must  be  taxed  high  enough  to  give  protec- 
tion to  British  farmers  and  preference  to  the 
Dominions.  And  this  at  a  time  when,  as  a 
faithful  member  of  the  Alhance,  she  is  in- 
vited to  abandon  her  trade  with  Germany, 
her  largest  and  most  profitable  customer, 
who  took  one-third  of  her  total  exports. 
How  unlikely  it  is  that  Russia  will  assent 
to  such  proposals  appears  from  the  recent 
discussion  of  the  National  Agricultural 
Congress  at  Petrograd,  w^hen  the  Chief  of 
the  JNIinistry  of  Trade  dwelt  on  the  utter 
impracticability  of  setting  up  barriers  on 
trade  with  Germany. 

The  dependence  of  Russia  upon  Germany 
for  a  market  for  her  surplus  foods  and  raw 
materials  is  a  "law  of  nature."  It  is  based 
upon  the  permanent  facts  of  conterminous 
frontiers  and  diversity  of  natural  resources 
and  economic  development.  Western  Russia 
cannot  dispense  with  German  markets  either 
for  import  or  for  export  trade.  Here  is 
what  M.  BoublikofF,  a  financial  expert  and 
a  member  of  the  Duma,  said  at  tlie  Congress 


44  THE  NEW  PROTECTIONISM 


on  the  subject  of  the  proposed  boycott  of 
Germany : 

«<  Why  did  Russia  buy  so  much  merchan- 
dise in  Germany  ?  Because  she  was  able  to 
get  it  at  a  lower  price  or  on  more  advan- 
tageous conditions  than  in  England  or  in 
France.  It  is  clear,  then,  that  the  cessation 
of  commercial  relations  with  Germany  is 
equivalent  for  the  Russian  consumer  to  an 
increase  of  the  cost  of  living  and  an  aggrava- 
tion of  the  position  of  Russian  credit.  Is 
impoverished  Russia  able  to  bear  such  a 
burden  ?  There  cannot  be  two  answers  to 
that  question." 

Such  proposals  are  hardly  likely  to  con- 
duce to  mutual  good-will  among  the  Allies, 
or  the  endurance  of  the  Alliance  after  the 
immediate  emergency  of  war  has  passed. 

3.  Nor  would  the  trouble  be  confined  to 
our  Allies. 

The  establishment  of  a  new  complex  tariff, 
to  operate  immediately  peace  was  restored, 
would  have  a  disastrous  effect  in  retarding 
the  recovery  of  our  industry  and  commerce. 
At   a   time  when,   in   any  case,  great    un- 


THE  TANGLES  OF  A  TARIFF  45 

certainty  must  prevail  as  to  the  future 
course  of  trade,  and  when  business  men  are 
gravely  hampered  in  their  plans  and  their 
finance,  this  violent  dislocation  is  to  be 
brought  about  in  the  delicate  mechanism 
of  international  trade. 

There  is  not  a  trade  in  England  that 
would  not  be  affected  injuriously  in  some 
way  by  the  complications  of  such  a  tariff. 

The  term  "  key -industry "  has  recently 
been  invented  to  describe  trades  which,  like 
the  aniline  dye  trade,  are  supports  of  great 
staple  industries.  'J'he  suggestion  is  that  a 
small  number  of  these  "key-industries"  exist 
which  at  all  costs  must  be  kept  under  British 
control.  Now,  this  account  of  industry  is 
quite  illusory.  There  is  no  important  trade 
which  is  not  dependent  for  its  successful 
conduct  upon  dozens  of  other  trades,  many 
of  them  necessarily  outside  the  limits  of  our 
country,  our  Empire,  or  the  Alliance.  In 
the  future,  as  in  the  past,  we  shall  have  to 
draw  many  of  our  raw  materials  from  foreign 
countries,  which  might  become  our  enemies, 


46  THE  NEW  PROTECTIONISM 

or  where  the  sources  of  supply  might  pass 
under  enemy  control.  Nor  can  we  insure 
that  all  the  plant  and  machinery  and  the 
processes  we  find  it  best  to  use  in  our  great 
staple  industries  are  home-produced.  Yet 
most  of  the  trades  producing  these  materials 
or  plant  or  conducting  these  processes  are 
"  key-industries  "  in  the  sense  that  they  are 
indispensable  to  the  final  product.  To  hold 
that,  by  tariffs  or  other  political  instruments, 
we  can  root  out  permanently  all  dependence 
of  our  necessary  trades  upon  some  product 
or  process  of  foreign  industry  is  a  sheer 
absurdity.  And  if  we  could,  we  should  not 
really  fulfil  the  requirements  of  *' defence." 
For  the  history  even  of  the  last  few  decades 
shows  how  easily  new  enemies  may  arise, 
how  quickly  such  "  key-industries  "  change, 
and  how  feeble  are  war  alliances  as  securities 
for  future  amity.  The  new  doctrine  that 
we  must  keep  all  "  key-industries  "  in  our 
own  hands  is  an  impossible  doctrine  for 
any  thickly  peopled  and  highly  developed 
country.      It    is    only   made    plausible    by 


THE  TANGLES  OF  A  TARIFF  47 


giving  a  wlioUy  false  limitation  to  the  term 
"  key-industry." 

4.  So  far  as  the  object  of  our  New  Protec- 
tion is  to  damage  German  trade  by  refusing 
admission  to  our  markets,  it  is  clearly  un- 
attainable. Prohibitive  or  high  tariffs  can, 
of  course,  preclude  direct  German  imports. 
But  it  will  be  very  difficult  to  extend  this 
prohibition  to  German  goods  imported 
through  neutral  countries.  In  respect  of 
many  kinds  of  goods  it  will  be  easy  to 
cancel  or  to  disguise  their  place  of  origin, 
when  it  is  the  interest  of  the  neutral  country 
to  encourage  such  deceit,  and  of  the  British 
importer  to  connive  at  the  deceit.  Large 
quantities  of  German  goods,  we  may  be 
sure,  would  find  their  way  into  our  markets 
via  Belgium  and  Holland,  Sweden,  Switzer- 
land, and  Spain.  They  would  simply  cost 
us  extra  carriage  and  the  profits  of  another 
middleman. 

Even  supposing  that  our  regulations  were 
so  stringent  as  to  enable  us  to  detect  and  to 
exclude   goods   of   German   origin    coming 


48  THE  NEW  PROTECTIONISM 


through  other  foreign  countries,  the  injury 
inflicted  by  this  process  on  German  export 
export  trade  and  the  protection  afforded  to 
our  manufacturers  would  be  inconsiderable. 
The  German  sugar,  cottons,  woollens,  steel 
manufactures,  and  toys,  which  we  refused  to 
take  from  Germany,  would  find  a  larger 
market  in  other  European  countries,  dis- 
placing their  own  goods  for  consumption 
in  those  countries  and  diverting  them  into 
our  markets.  What  difference  would  it 
make  if,  instead  of  receiving  German  engines, 
Holland  received  those  engines,  and  we 
imported  Dutch  engines  ? 

Of  course,  the  actual  effects  of  an  attempted 
boycott  of  German  goods  would  be  a  good 
deal  more  complicated.  German  semi- 
manufactured goods  would  go  to  other 
countries  for  a  final  process  qualifying  them 
for  entrance  to  our  markets.  Neutral 
countries,  profiting  by  the  larger  importation 
of  German  steel,  dyes,  yarns,  machinery, 
chemicals,  etc.,  which  were  refused  entrance 
to  our  markets,  would  build  up  manufac- 


THE  TANGLES  OF  A  TARIFF  49 

tures  upon  a  better  or  cheaper  basis  than 
ours,  and  would  out-compete  our  merchants 
in  the  South  American  or  China  trade. 

The  following  list  of  chief  staple  imports 
from  Germany  into  the  United  Kingdom  in 
1913  will  show  to  what  a  large  extent  that 
trade  consisted  of  goods  w^hich  were  raw 
materials  or  instruments  of  production  in 
British  manufactures,  affecting  the  cost  of 
production  and  prices  of  final  commodities. 

Staple  Imports  into  United  Kingdoim  from  Germany. 

Sugar        10,912,018 

Glass  and  manufactures .. .          ...  1,298,384 

Cottons  and  yarns            ...          ...  7,540,867 

Woollens  and  yarns         ...          ...  2,592,925 

Iron  and  steel  and  manufactures  7,524,533 

Machinery            2,384,142 

Toys          1,183,703 

Since  there  is  no  prima  facie  reason  for 
believing  that  Germans  gained  more  by 
selling  us  these  goods  than  we  from  buying 
goods  which  we  presumably  found  better  or 
cheaper  than  we  could  get  elsewhere,  why  is 
the  s^onnaire  of  this  trade  likely  to  injure 

4 


50  THE  NEW  PROTECTIONISM 

German  trade  more  than  British  trade  ? 
How  will  it  advantage  this  country  to  limit 
its  sources  of  supply  of  sugar  and  yarns  and 
machinery  and  chemicals,  and  to  pay  a 
higher  price  for  them  ?  For  the  notion 
that  we  can  produce  all  these  things,  as  well 
and  as  cheaply,  within  this  country  or  the 
Empire,  without  the  necessity  of  importing 
them  from  foreign  countries,  is  unwarranted. 
It  is  based  upon  a  childish  refusal  to  admit 
the  utility  of  specialization,  division  of 
labour,  and  exchange  between  nations. 

There  is  no  reason  for  supposing  that  the 
fivefold  discrimination  of  the  proposed  tariff 
would  assist  the  ''  defence  "  of  this  country, 
though  it  would  certainly  diminish  its  opu- 
lence. 

No  tariff  could  go  any  appreciable  dis- 
tance towards  making  the  United  Kingdom 
economically  self-sufficing  for  the  necessaries 
of  life. 

Exclusive  dependence  on  our  overseas 
dominions  for  foods  and  other  necessaries 
would   not  reduce  the  submarine  or  other 


THE  TANGLES  OF  A  TARIFF  51 


risks  ill  time  of  war,  while  it  would,  by 
limiting  the  sources  of  supply  in  time  of 
peace,  cause  grave  fluctuations  in  supplies 
and  prices.  A  tariff  involving  a  withdrawal 
from  our  Allies  of  their  hitherto  free  market 
in  this  country  would  operate,  not  as  a 
cement,  but  as  a  dissolvent  of  friendship. 
Nor  would  the  stiff  taxation  upon  neutrals, 
necessary  to  furnish  three  lower  scales  of 
preference,  conciliate  the  commercial  or 
poHtical  friendship  of  these  countries. 
Finally,  considered  as  a  weapon  against 
Germany,  a  trade  boycott,  so  fai'  as  it  is  not 
futile,  has  a  recoil  equal  to  the  force  of  its 
discharge. 


CHAPTER  IV 

PROTECTION  NO  DEFENCE 

The  Report  of  the  Paris  Economic  Con- 
ference represented  the  Empires  of  Central 
Em-ope  as  "  to-day  preparing  in  concert 
with  their  aUies  a  contest  in  the  economic 
plane  which  will  not  only  survive  the  re- 
establishment  of  peace,  but  will  at  that 
moment  attain  its  full  scope  and  intensity." 
In  a  recent  interview  with  a  representa- 
tive of  the  United  Press  of  America,  Mr. 
Runciman  is  reported  to  have  said  :  "  Ger- 
many has  announced  that  at  the  conclusion 
of  the  war  she  will  attempt  to  establish  a 
Customs  Union  of  the  Central  Powers  on 
aggressive  lines."  The  general  idea  appears 
to  be  that  Austro- Hungary  should  allow 
German  science,  business  enterprise,  and 
finance  to  develop  and  organize  its  natural 

52 


PROTECTION  NO  DEFENCE  53 

resources  and  its  industry,  so  as  to  make 
the  Central  Powers  practically  self-sufficing 
in  the  essentials  of  economic  life.  Joint 
political  and  economic  pressure  would  then 
be  used  not  only  to  bring  their  present 
allies,  Bulgaria  and  Turkey,  within  this 
Customs  Union,  but  to  persuade  or  coerce 
the  smaller  neutral  neighbours,  such  as 
Holland,  Denmark,  Switzerland,  perhaps 
Sweden,  to  come  into  a  Middle  European 
system  which  would  divide  the  ^^^estern 
Allies  from  Russia  and  constitute  the  basis 
for  a  formidable  political  and  military 
alliance.  There  is  no  evidence  that  any 
such  plan  has  gone  further  than  the  pre- 
liminary stage  of  a  conference  between 
politicians  and  economists  at  Berlin  and 
Vienna.  The  difficulties  of  the  first  step 
in  so  ambitious  a  design,  a  Customs  Union 
of  the  two  Empires,  are  believed  by  many 
to  be  insurmountable.  But,  assuming  tliat 
Germany  did  throw  her  energies  into  this 
aggressive  project,  using  all  her  diplomatic 
and  economic  resources  thus  to  extend  her 


54  THE  NEW  PROTECTIONISM 


business  control,  in  order  to  strengthen 
herself  for  another  war  of  conquest,  would 
a  tariff  be  of  any  use  to  us,  either  for  stop- 
ping the  execution  of  the  project  or  for 
assisting  us  to  meet  its  menace  ? 

Tariff  arrangements  among  the  Allies  for 
the  virtual  boycott  of  the  Central  Powers, 
so  far  from  hindering  the  formation  of  this 
"  Middle  Europe,"  would  do  everything  to 
help  it.  Its  advocates  are  already  pressing 
upon  its  opponents  the  same  argument 
which  our  Protectionists  urge,  viz.,  the  need 
for  an  economic  union  of  "  defence  "  against 
the  economic  war  we  propose  to  wage.  If 
we  announced  prohibitive  duties  on  German- 
Austrian  goods,  with  accompanying  restric- 
tions upon  shipping,  finance,  and  other 
economic  intercourse,  an  immense  incentive 
would  be  given  to  the  accomplishment  of 
the  German  scheme.  Deprived  of  so  large 
a  section  of  the  world-market,  these  nations 
would  be  forced  partly  into  better  organiza- 
tion of  their  common  resources,  partly  into 
stronger  pressure  upon  neutral  markets  both 


PROTECTION  NO  DEFENCE  55 

in  Europe  and  elsewhere.  Since  the  nature 
of  our  tariff,  with  its  preferences  to 
Dominions  and  AUies,  would  compel  us 
to  make  stiff  terms  for  neutrals,  the 
countries  against  which  we  raised  these  new 
barriers  would  by  stress  of  legitimate  self- 
interest  be  brought  over  to  the  Central 
European  system.  Our  traders  complain 
of  the  ever  keener  competition  of  tlie 
Germans  in  the  growing  markets  of  the 
Far  East  and  of  South  America.  A  tariff 
upon  wheat  from  Argentina,  or  tea  and  rice 
from  China,  would  hardly  help  us  to  push 
in  these  countries  our  manufactured  goods, 
which  would  then  be  offered  at  higher 
prices  to  cover  the  enhanced  cost  of  pro- 
duction which  our  general  tariff  would 
involve. 

A  protective  tariff  here  can  do  nothing 
to  check  or  impede  German  economic 
aggression.  It  can  only  make  it  more 
successfully  aggressive.  Would  it,  on  the 
other  hand,  strengthen  our  national  resist- 
ance to  this  aggression  ?     How  should  it  ? 


56  THE  NEW  PROTECTIONISM 

It  can  have  only  two  chief  and  inevitable 
effects. 

1.  It  would  reduce  our  aggregate  national 
income,  and  so  our  resources  alike  for  armed 
defence  upon  the  one  hand,  economic 
defence  upon  the  other.  How  can  the 
advocates  of  a  policy  which  diminishes  our 
funds  alike  for  education,  scientific  experi- 
mentation, and  technical  equipment  (the 
supreme  needs  for  successful  competition 
with  Germany)  plead  '*  defence  "  ? 

2.  It  wastes  the  sources  of  public  revenue. 
A  large  proportion  of  the  gross  yield  of  a 
tariff  is  consumed  in  expenses  of  collection. 
By  enabling  protected  industries  to  raise 
their  prices  it  throws  on  consumers  a  burden 
of  payment  vastly  greater  than  the  gain  to 
public  revenue.  The  incidence  of  this 
burden  is  heaviest  on  the  poorer  working 
classes,  for  the  prices  of  the  necessaries  of 
life  are  subject  to  the  greatest  increase. 
Thus  the  standard  of  living  of  the  workers 
is  depressed  and  their  productive  efficiency 
impaired. 


PROTECTION  NO  DEFENCE  57 


It  thus  appears  how   bad   a   weapon   of 
defence  a  general  tariff  is.     But  it  has  an 
even  worse  defect.     No  other  pohcy  could 
do  so  much  to  make  another  early  war  in- 
evitable.     The   superficial   notion   that   by 
hindering   the   economic   recuperation   and 
the  commercial  development  of  the  Central 
Powers   it   would  cripple  their  projects  of 
"  revenge  "  will  bear  no  investigation.     It 
could  have  no    such   tendency.      The   an- 
nouncement of  the  intention  of  the  Allies 
to  pursue  a  punitive  economic  policy  after 
the  war  must  confirm  the  false  statements 
made  in  Germany  that  England  in  making 
war  was  actuated  by  feelings  of  commercial 
jealousy.    This  would  feed  the  spirit  of  hate 
and  revenge,  and  would  help  to  maintain  in 
Germany   the  Prussian   militarism  we   are 
seeking  to  crush.      This  militarism  would 
animate     the    new     economic    system     of 
'*  Middle  Europe."     Tariff  wars  would  keep 
alive  everywhere  the  memories  of  the  mili- 
tary struggle,  and  would  be  recognized  as 
preparations    and    incentives    to    an    early 


58  THE  NEW  PROTECTIONISM 

renewal  of  the  struggle,  as  soon  as  one  of  the 
two  parties  found  a  "  favourable "  oppor- 
tunity. The  "  balance  of  power  "  policy  in 
the  economic  world  would  be  clearly  under- 
stood to  be  an  instrument  and  an  index  of 
the  terrible  military  struggle  waiting  in  the 
background.  Not  only  Europe  but  the 
whole  world  would  tend  to  be  drawn  into 
the  new  battle-array,  as  members  of  one 
economic  group  or  the  other.  A  breaking 
of  Europe  into  two  hostile  commercial 
systems  would  be  an  even  greater  crime 
against  civilization  than  the  war  itself.  For 
it  would  be  an  open-eyed  prostitution  of 
peaceful  commerce  to  the  purposes  of  inter- 
national hostility.  It  would  be  the  per- 
petuation of  a  trench  warfare  in  which 
Custom  officers  would  take  the  place  of 
soldiers.  The  mode  of  fighting  would  be 
different,  the  aim  and  the  animating  prin- 
ciple would  be  the  same.  The  net  effect 
would  be  to  reverse  the  great  and  fruitful 
processes  of  human  co-operation,  not  only 
in   the   mutually  profitable  interchange  of 


PROTECTION  NO  DEFENCE  59 


goods,  but  in  every  other  mode  of  inter- 
course. International  law,  so  much  battered 
and  enfeebled  by  the  experiences  of  war, 
would  be  unable  to  raise  its  head  again  in 
such  an  atmosphere,  or  to  begin  to  recover 
that  authority  which  is  indispensable  to  any 
liope  for  European  civilization.  All  that 
elaborate  and  delicate  network  of  communi- 
cations by  which,  not  only  for  business  and 
personal  relations,  but  for  the  common  tasks 
of  humanity  in  the  world  of  tliought  and 
science,  art,  literature,  and  philanthropy, 
men  of  all  nations  have  laboured  tos'ether 
regardless  of  political  boundaries,  would 
suffer  wreckage  by  this  subversive  enter- 
prise. 


CHAPTER  V 

NAVIGATION  LAWS 

So  far  I  have  dealt  with  tariffs  as  the 
weapon  of  defence  and  of  offence  by  which 
our  New  Protectionists  propose  to  wage 
"the  war  after  the  war."  But  there  are 
other  supplementary  weapons  which  most 
of  them,  in  concert  with  our  Allies,  desire 
to  employ. 

Supposing  it  be  impracticable  or  undesir- 
able to  impose  an  absolute  boycott  on  all 
German  or  other  Central  European  goods 
seeking  entrance  to  our  markets,  admission 
under  a  high  tariff  being  preferable,  there 
are  various  ways  of  hampering  such  trade 
and  confining  it  to  things  that  are  both 
safe  and  indispensable.  German  commercial 
travellers   can   be   penalized   in   the  Allied 

countries  ;  German  firms  can  be  refused  the 

60 


NAVIGATION  LAWS  61 


protection  of  our  Patent  Laws,  and  can  be 
excluded  from  competition  for  contracts. 
Let  German  capital  be  refused  the  right 
to  "  invade  "  the  business  companies  of  the 
Allied  countries ;  let  German  companies,  or 
German-owned  companies  of  other  countries, 
be  refused  quotation  upon  any  Allied 
Bourse.  So  it  would  be  possible  to  "  extir- 
pate the  cancer  of  German  trade  "  from  our 
system.  But,  further,  an  organized  attack 
can  be  made  upon  the  foreign  trade  of  Ger- 
many, not  merely  in  all  Allied  markets,  by 
discriminating  harbour  dues  and  other  ham- 
pering conditions,  but  by  adopting  various 
methods  of  attack  on  German  shipping. 
Why  not  refuse  to  admit  into  our  ports  all 
German  ships,  or  to  allow  them  coaling 
facilities,  whether  they  carry  German  goods 
or  neutral  goods  ?  Why  not  **  keep  British 
trade  for  British  ships  "  ?  or,  by  the  broader 
doctrine.  Allied  trade  for  Allied  ships  ? 
Some  of  these  proposals  ingratiate  them- 
selves not  only  with  avowed  Protectionists, 
but  with  some  nominal  Free  Traders.     All, 


62  THE  NEW  PROTECTIONISM 

however,  are  subject  to  the  two  defects 
which  we  saw  were  fatal  to  tariffs  as  methods 
of  defence — the  defect  that  the  recoil  is 
equal  to  the  blow  for  offence,  and  the  related 
defect  that  "  two  can  play  at  that  game." 
If  we  make  it  more  difficult  for  Germans  to 
sell  their  better  or  cheaper  articles  in  this 
country,  we  compel  our  own  people  to  buy 
and  to  consume  dearer  or  worse  articles. 
If  we  refuse  to  admit  tenders  from  German 
firms  for  advertised  contracts,  we  restrict 
competition,  increase  the  probability  of  col- 
lusion between  British  contractors,  compel 
ourselves  to  pay  more,  wait  longer,  or  get 
inferior  work.  If  we  deny  Patent  Law 
protection,  the  same  results  ensue :  either 
we  do  not  get  the  special  articles  our  people 
want,  or  we  get  them  indirectly  and  with 
greater  difficulty  at  a  higher  cost.  If  the 
articles  we  thus  penalize  are  materials, 
machines,  or  processes  serviceable  to  some 
British  industry,  as  is  the  case  with  many 
German  specialities,  such  as  electrical  and 
scientific  instruments,  dyes  and  chemicals, 


NAVIGATION  LAWS  63 

steel,  etc.,  we  load  these  British  industries 
witli  some  increased  cost,  or  some  inferiority 
of  production,  so  hampering  them  for  com- 
petition in  export  trade,  and  even  for  compe- 
tition in  our  own  markets  with  articles 
imported  from  foreign  countries  that  take 
advantage  of  the  superior  German  methods. 
Suppose,  as  is  most  hkely,  no  efforts  enable 
us  to  make  aniline  dyes  as  well  or  as  cheaply 
as  long  years  of  scientific  practice  and  busi- 
ness organization  have  enabled  German 
firms  to  make  them,  our  coloured  textiles 
will  compete  in  all  foreign  markets  at  a  defi- 
nite disadvantage,  not  merely  with  German 
goods,  but  with  the  goods  of  other  foreign 
countries,  such  as  the  United  States,  admit- 
ting German  dyes.  Why  should  we  force 
our  consumers  and  our  business  men  to  buy 
at  a  disadvantage  in  order  to  injure  German 
sellers  ? 

No  doubt  it  seems  at  first  sight  as  if 
Germany  could  not  hit  back  with  equal 
force,  our  Imperial  (and  Allied)  markets 
being   so    much    more    important    to   their 


64  THE  NEW  PROTECTIONISM 

traders  than  are  their  narrower  markets  to 
ours.  But  the  considerations  just  urged 
prove  the  fallaciousness  of  this  assumption. 
For  the  back- stroke  of  our  boycott  against 
German  goods  will  be,  not  merely  that  we 
lose  the  German  markets  for  our  goods,  but 
that  we  are  seriously  damaged  in  all  the 
neutral  markets  of  the  world.  This,  we 
have  already  seen,  will  be  the  natural  and 
necessary  consequence  of  a  protective  tariff 
against  the  Central  Powers.  The  further 
penalties  we  are  here  considering  will  materi- 
ally enhance  this  damage  to  our  neutral 
markets. 

The  proposal  to  exclude  German  ships 
from  all  British  and  Allied  ports  and  coaling 
stations,  comes  w^ith  a  powerful  appeal  to 
many  who  regard  a  protective  tariff  as  a 
foolish  or  a  highly  questionable  expedient. 
The  abominable  outrages  committed  by 
German  vessels  upon  the  high  seas  during 
the  war,  would,  it  may  well  appear,  be  ap- 
propriately punished  by  such  a  policy  of 
exclusion.    Moreover,  obvious  considerations 


NAVIGATION  LAWS  66 


of  national  defence  appear  to  favour  a  pro- 
posal which  will,  by  crippling  the  German 
mercantile  marine,  deal  a  damaging  blow  to 
her  sea-power.  A  Navigation  Act,  there- 
fore, takes  a  prominent  place  in  the  New 
Protectionism. 

In  considering  the  value  of  a  navigation 
boycott  in  its  bearing  upon  British  com- 
merce and  British  defence,  we  are  fortunate 
in  having  a  clearer  testimony  from  the  pages 
of  history  than  is  usually  attainable.  For 
early  in  the  rise  of  British  sea-power  and 
foreign  commerce  we  conducted  a  note- 
worthy experiment  along  these  very  lines. 
The  rise  of  British  colonial  power  in  the 
seventeenth  century  induced  our  Govern- 
ment to  lend  assistance  to  our  trading  and 
shipping  businesses  in  their  efforts  to  break 
the  pre-eminence,  in  some  quarters  the 
monopoly,  of  the  carrying  trade  enjoyed 
by  the  Dutch.  An  Order  in  Council 
of  1640-47  prohibited  the  "  plantations  " 
from  shipping  any  of  their  produce  except  in 
English  bottoms.     This  was  followed  by  the 


66  THE  NEW  PROTECTIONISM 

fuller  policy  of  the  Navigation  Act  of  1651. 
"  It  provided  that  no  produce  of  any  country 
in  Asia,  Africa,  or  America,  should  be  im- 
ported into  any  territory  of  the  Common- 
wealth save  in  vessels  owned  by  Englishmen 
or  inhabitants  of  English  Colonies,  and 
manned  by  crews  of  which  more  than  half 
were  of  British  nationality ;  while  the  pro- 
duce of  any  part  of  Europe  was  to  be 
imported  only  in  English  vessels  or  in  vessels 
owned  in  the  country  in  which  it  was  pro- 
duced or  manufactured."*  A  few  years  later 
the  Act  was  further  strengthened  by  provi- 
sions confining  colonial  import  and  export 
trade  to  English  and  colonial  ships  of  which 
the  master  and  three-fourths  of  the  crew 
were  English,  the  same  conditions  being 
applied  to  home  imports  of  all  non-European 
produce  and  to  our  coasting  trade.  In  1661 
it  was  enacted  that  English  recognition 
should  be  confined  to  ships  built  in  England. 

*  "Shipping  after  the  War/'  by  the  Right  Hon. 
J.  M.  Robertson :  a  complete  historical  and  economic 
exposm'e  of  the  "  navigation  "  policy. 


NAVIGATION  LAWS  67 


While  admitting  that  "The  Act  of 
Navigation  is  not  favourable  to  foreign 
commerce  or  to  the  growth  of  that  opulence 
which  can  arise  from  it,"  Adam  Smith  con- 
tended that  it  was  advantageous  as  a  defence 
against  the  naval  power  of  Holland.  "  As 
defence,  however,  is  of  much  more  impor- 
tance than  opulence,  the  Act  of  Navigation 
is  perhaps  the  wisest  of  all  the  commercial 
regulations  of  England."  It  is  clear,  how- 
ever, that  the  Act  was  primarily  designed, 
not,  as  Adam  Smith  alleged,  against  Hol- 
land's naval  power,  but  against  her  carrying 
trade  and  commerce.  Mr.  J.  JNI.  Robertson, 
in  the  pamphlet  from  which  we  have  ah'eady 
quoted,  cites  ample  testimony  both  from 
contemporary  writers  and  from  later  his- 
torians to  show  that  the  Act  had  no  more 
value  for  defence  than  for  opulence.  The 
following  is  his  summary  of  the  results  of 
the  actual  working  of  these  Acts  : 

**  1.  In  so  far  as  they  were  specially  aimed 
at  Holland,  they  were  certainly  planned  to 


68  THE  NEW  PROTECTIONISM 


divert  carrying  trade  from  her  to  England, 
not  as  a  military  menace. 

"  2.  Their  real  effect  was  to  hamper 
English  trade  in  all  directions,  one  of  the 
first  results  being  a  serious  increase  in  prices 
and  in  the  cost  of  shipbuilding.  From 
twenty  to  ninety  years  after  the  passing  of 
the  first,  English  writers  lament  continued 
English  inferiority  to  Holland  in  shipping 
and  commerce. 

**  3.  Failing  alike  to  promote  English 
shipping  and  to  depress  Dutch,  they  obvi- 
ously added  nothing  to  English  naval 
power  as  against  Holland. 

'*  4.  We  have  express  English  testimonies 
to  the  operation  of  superior  Dutch  powe?% 
in  addition  to  supremacy  in  trade,  many 
years  after  the  first  enactment ;  and  it  was 
after  it  had  run  for  twenty-two  years  that 
the  Dutch  raided  the  Med  way. 

"  5.  In  particular,  the  main  fields  to  be 
cultivated  for  the  furnishing  of  seamen,  the 
fisheries,  were  in  no  way  improved  by  the 
monopoly  policy,  and  seem  to  have  been 
positively  depressed  by  it.  '  The  numbers 
employed  in  Holland  by  their  fishery  is 
prodigious,'  writes  Harrison  in  1744  (p.  24). 
'  I  fear  ours  bear  no  comparison.' 

"  G.  Even  the  trade  between  Holland  and 
England  soon  developed   anew  by  way  of 


NAVIGATION  LAWS  69 

systematic  smuggling,  which  defrauded  the 
EngHsh  revenue.  And  the  provision  against 
imports  of  non-national  produce  by  foreign 
ships  seems  to  have  set  the  Dutch  upon 
extending  their  manufactures.  Thus,  a 
French  writer  on  Dutch  trade  in  1700,  re- 
ferring to  the  English  Act  of  1651,  states 
that  the  Dutch  *  had  not  then  anything 
like  the  manufactures  they  have  at  this 
moment.'  "* 

But  if  history  is  not  encouraging  to  the 
project  of  reviving  Navigation  Acts,  con- 
sideration of  the  economic  results  likely  to 
follow  from  a  new  experiment  along  these 
lines  is  still  more  unfavourable.  The  first 
obvious  effect  of  excluding  German  ships 
from  our  ports  will  be  that  British  ships  will 
be  excluded  from  German  ports.  A^ow, 
since  the  British  tonnage  entering  German 
ports  before  the  war  was  about  four  times 
as  great  as  the  German  shipping  entering 
British  ports,  this  first  effect  of  a  mutual 
boycott  would  be  to  our  disadvantage.  The 
next  effect  would  be  to  put  all  the  trade 

*  "  Shipping  after  the  War,"  pp.  ly,  iu. 


70  THE  NEW  PROTECTIONISM 


which  might  still  be  carried  on  between 
Germany  and  Great  Britain,  or  between 
the  Central  Powers  and  the  Alliance,  into 
the  hands  of  neutral  countries.  Holland, 
Sweden,  and  the  new  mercantile  marine  of 
the  United  States,  would  be  the  gainers. 
Nor  would  this  gain  to  neutrals  be  con- 
fined to  this  trade  between  the  two  hostile 
systems.  Shipowners  in  Germany  and  in 
Great  Britain  wishing  to  engage  in  the 
general  carrying  trade  of  the  world  would 
find  the  ships  carrying  their  national  flag 
hampered  in  their  most  profitable  use  by 
these  Navigation  Laws.  Ships  carrying 
neutral  flags  would  enjoy  a  great  advantage. 
They  would  thus  be  impelled  to  put  their 
ships  under  neutral  flags,  and  to  become 
investors  in  neutral  shipping  companies. 
Germany  would  certainly  be  disposed  to 
take  this  course,  both  in  order  to  reap  the 
greater  profits  earned  under  neutral  flags 
and  their  greater  ''  freedom  of  the  sea,"  and 
to  secure  immunity  from  capture  in  the 
event  of  another  war. 


NxVVIGATION  LAWS  71 

It  is,  of  course,  possible  that  we  might 
try  to  meet  this  German  shipping  poHcy  by 
excluding  from  our  ports  neutral  ships  of 
German  origin,  or  belonging  to  companies 
owned  entirely  or  in  large  part  by  Germans. 
But  how  can  we  obtain  satisfactory  evidence 
of  the  ownership  of  every  vessel  claiming  to 
enter  our  ports  under  a  neutral  flag  ?     Is 
every  foreign  Government   likely  to   obey 
our  behest  to  give  us  an  official  certification 
of  the   ownership   of  every   ship   which  is 
empowered  to  fly  its  colours,  including  an 
up-to-date  list  of  the  holders  of  all  shares 
in   shipping   companies   registered   in  their 
country  ?     Anyone  acquainted  with  the  in- 
tricacies of  modern  finance,  with  its  com- 
plication of  Trust  Companies  and  Holding 
Companies,  will  recognize  tlie  absurdity  of 
such  a  notion.     The  mad  logic  of  such  a 
navigation  policy  would,  if  followed  to  its 
end,    drive    us    to    exclude    on    reasonable 
suspicion   all   foreign   shipping,   neutral   as 
well   as   hostile,    and   to    establish   an    all- 
British  shipping  policy. 


72  THE  NEW  PROTECTIONISM 


Considering  our  growing  national  depen- 
dence upon  large,  free,  quick,  reliable  sea- 
transport  for  the  existence  of  our  population 
and  our  industry,  it  would  appear  singularly- 
unwise  to  jeopardize  our  practical  control 
over  the  sea,  even  if  we  could  thereby  inflict 
a  graver  injury  to  German  commerce  and 
sea -power.  To  take  such  a  course  after  the 
experience  of  a  war  in  which  not  only  the 
safety,  but  the  financial  stability,  of  our 
nation  is  seen  so  patently  to  rest  upon  our 
predominance  in  shipping  would  be  an  act 
of  inconceivable  folly. 


CHAPTER  VI 

HOW  TO  MEET  TRADE  AGGRESSION 

Many  who  reject  the  idea  of  a  general  tariff 
in  this  country,  either  for  national  defence 
or  as  part  of  a  future  economic  war,  are 
quite  riglitly  disposed  to  consider  whether 
steps  should  not  be  taken  to  prevent  certain 
articles  and  processes,  which  are  important 
for  war  purposes  or  for  the  maintenance  of 
vital  industries  in  this  country,  from  passing 
under  foreign  control. 

Those  who  apprehend  an  aggressive  policy 
in  the  future  in  trade  and  finance  on  the  part 
of  our  present  enemies  mean  two  different 
things.  Sometimes  they  mean  that  these 
States,  by  subsidies  and  otlier  public  aids, 
will  set  themselves  to  establish  and  to  foster 
certain  industries  and  branches  of  trade 
abroad,  in  order  to  have  a  monopoly,  or  a 

73 


74  THE  NEW  PROTECTIONISM 

superior  position,  in  the  event  of  war.  Some- 
times they  merely  mean  that  their  traders 
and  industriahsts,  backed  by  the  banks,  will 
pursue  a  pushful  policy  abroad,  and  by  skil- 
ful investments  or  energetic  touting  obtain 
control  of  important  sources  of  supply  or 
markets.  In  the  latter  case  the  "aggres- 
sion "  is  nothing  but  successful  economic 
competition  regarded  from  the  standpoint  of 
the  unsuccessful  competitor.  Great  Britain 
in  this  sense  has  been,  and  still  is,  the  most 
aggressive  of  nations,  pushing  her  successful 
trade  and  her  control  of  the  natural  resources 
of  foreign  countries  far  further  than  her 
rivals.  The  British  control  of  the  huge  re- 
sources of  Argentina,  for  example,  is  far 
more  complete  than  that  of  German  traders 
and  financiers  in  any  foreign  country. 

It  is  no  doubt  possible  to  hold  that  behind 
all  this  German  trade  and  investment  stand 
the  German  State  and  its  militarist  policy. 
That  the  German  State  has  kept  in  closer 
organic  relations  than  our  State  with  in- 
dustry and  trade,  both  internal  and  foreign. 


HOW  TO  MEET  TRADE  AGGRESSIOxN     75. 

fostering  and  supporting  it  by  educational 
policy,  transport  subsidies,  tariff  bounties, 
consular  assistance,  etc.,  is  not  a  matter  of 
dispute.  The  advances  made  by  German 
trade  and  finance  in  all  parts  of  the  world 
within  the  last  twenty  years  have  been, 
however,  almost  entirely  the  results  of 
private  business  enterprise.  The  application 
of  chemical  and  physical  science  to  the 
industrial  arts ;  the  training  in  commerce 
and  in  languages ;  the  detailed  study  and 
cultivation  of  new^  markets ;  the  financial 
assistance  given,  after  expert  inquiry,  to 
new  industrial  and  commercial  proposals, 
the  main  causes  of  German  commercial 
development,  are  primarily  due  to  the 
intelligence,  industry,  and  organization,  of 
business  firms  operating,  not  for  political 
service,  but  for  profits. 

To  pretend  that  all  this  activity  is  in  the 
main  a  screen  and  an  instrument  of  Prussian 
State  policy,  aimed  to  penetrate  all  countries 
of  the  world  commercially  and  financially, 
in   order    to    convert    this    economic    into 


76  THE  NEW  PROTECTIONISM 


political  control,  is  idle  vapouring,  whether 
it  proceeds  from  angry  bagmen  or  from 
statesmen  who  should  be  **  responsible." 
Take  as  a  conspicuous  example  the  follow- 
ing passage  from  a  speech  delivered  at 
the  opening  of  the  Paris  Conference  by 
M.  Briand  ;* 

"The  war  has  shown  us  the  extent  of 
econornic  slave?^y  to  which  we  were  to  be 
made  subject.  We  must  realize  that  the 
danger  was  great,  and  that  mir  adve7\mries 
were  on  the  eve  of  success.  Then  came  the 
war.  The  war,  with  the  immense  sacrifices 
which  it  demands,  will  not  have  been  in 
vain  if  it  brings  about  aii.  economic  libe7^atio7i 
of  the  world,  and  restores  sane  commercial 
methods.  We  are  all  determined  to  shake 
off  the  yoke  which  was  being  forced  upon  us, 
and  to  resume  our  commercial  intercourse 
in  order  freely  to  join  it  to  that  of  our 
Allies." 

What  is  signified  by  the  passages  here 
italicized,  or  by  corresponding  language  in 
the    preamble  of  the  Report  of  the  Paris 

*  Times  Report,  June  15,  1916. 


HOW  TO  MEET  TRADE  AGGRESSION  77 


Conference  ?     What  economic  slavery  was 
Germany  seeking  to  impose  on  France,  and 
on   the   world,    from    which   this    war   will 
liberate   them  ?      Germans   (not   Germany) 
were    no   doubt   increasing   the  volume   of 
their  foreign  trade  ;  their  manufactures  were 
entering  new  markets  in  various  countries. 
AVealthy    Germans   were   investing   an   in- 
creasing quantity  of  savings  in  mining,  rail- 
road, and    industrial  companies  in   France, 
Italy,  Belgium,  and  other  European  coun- 
tries, as  well  as  large  sums  in  similar  business 
enterprises    in    the    United    States,    South 
America,  and    elsewhere.     Wliat   of  that  ? 
In  what  real  sense  has  the   United   States 
been  subject  to  *'  economic  slavery  "  because 
her  business  men  have  borrowed  enormous 
sums  from  European  investors  to  make  their 
railways  and  open  up  their  resources  ?     If 
some  of  the  spare  capital  of  Germany  in 
recent  years  has  gone  into  French  companies 
engaged  in  developing  iron  and  coal,  does 
M.  Briand  seriously  contend  that  this  has 
injured    or    imposed    "domination  '    upon 


78  THE  NEW  PROTECTIONISM 

France — i.e.,  that  Frenchmen  would  have 
been  better  off  if  they  had  not  borrowed 
abroad  larger  quantities  of  useful  capital  at 
lower  rates  than  they  could  get  at  home  ? 
In  some  French  and  Italian  enterprises 
German  investors,  or  even  German  banks, 
doubtless  exercised  a  preponderant  control, 
as  British  investors  or  financial  companies 
do  in  Argentina  and  many  other  countries. 
But  in  what  sense  has  the  war  exhibited 
these  operations  as  "  economic  slavery," 
unless  in  the  sense  in  which  Socialists  regard 
all  capitalist  control  in  this  light  ? 

The  German  State  has  doubtless  had  a 
powerful  secret  service  in  many  foreign 
countries,  and  may  have  utilized  branches  of 
German  firms  abroad  as  sources  of  political 
information.  The  widespread  employment 
of  German  clerks  in  foreign  commercial 
houses  has  undoubtedly  given  German  firms 
a  fuller  knowledge  of  the  business  conditions 
of  their  foreign  competitors  than  commercial 
firms  in  England  possess. 

But  all  these  arts  and  practices  are  nothing 


HOW  TO  MEET  TRADE  AGGRESSION  79 


else  than  an  intelligent  seizure  of  legitimate 
business  opportunities.  What  German  firms 
have  been  doing,  our  firms  also  should  have 
been  doing,  and,  so  far  as  we  have  been 
successful,  have  been  doing.  The  notion 
that  all  this  expanding  German  trade  and 
finance  have  been  the  cat's-paw  of  the  aggres- 
sive German  State  is  baseless.  The  capitalists 
who  rule  German  industry,  trade,  and  finance, 
are  out  for  profits,  not  for  political  aims,  and 
their  success  would  have  been  impossible  on 
any  other  terms.  Like  business  men  in  every 
other  country,  they  get  what  use  they  can 
from  the  Government,  in  the  way  of  educa- 
tion, transport,  tariffs,  and  diplomatic  pres- 
sure. But  the  suggestion  that  German 
traders,  bankers,  colonists,  are  merely  ad- 
vance accents  of  the  German  State  is  one 
of  those  impositions  upon  credulity  which 
would  not  have  been  possible  in  any  other 
atmosphere  than  that  of  war.  There  is  no 
better  illustration  of  this  credulity  than  the 
easy  acceptance  by  "  the  man  in  the  street " 
of  the  familiar  charge  against  Germans  of 


80  THE  NEW  PROTECTIONISM 


pursuing  a  policy  of  "scientific  dumping." 
The  only  intelligible  meaning  to  this  term 
would  be  that  of  a  deliberate  policy  of  a 
German  cartel  or  "  monopoly  "  to  pour  goods 
on  to  our  markets  at  cut-prices,  so  as  to  ruin 
British  competitors,  drive  them  out  of  trade, 
and  then  improve  their  goods  at  prices 
raised  so  as  to  recoup  them  for  the  earlier 
cut-prices  by  which  they  acquired  the  market. 
1  believe  a  good  many  people  believe  this  is 
what  "  the  Germans  "  have  been  doing.  But 
nobody  can  point  to  any  actual  trade  where 
they  have  done  it.  In  theory,  no  doubt, 
it  is  a  possibility,  though  the  conditions  of 
success  would  be  very  difficult.  In  practice 
it  has  been  found  impossible  to  dump  suc- 
cessfully in  a  Free  Trade  country.  "  It  has," 
says  Mr.  Macrosty,*  *'  been  demonstrated  by 
abundant  German  experience  that  dumping 
does  not  pay,  and  that  it  is  more  advan- 
tageous for  a  domestic  trust  or  cartel  that 
export  trade  should  be  so  regulated  as  to 
yield  the  maximum  of  profit." 

*  ^^The  Trust  Movement  in  British  Industry,"  p.  342, 


HOW  TO  MEET  TRADE  AGGRESSIOxN     81 


It  is  pretty  safe  to  assume  that  German 
and  other  rival  traders  and  investors  are, 
broadly  speaking,  out  for  profit,  and  for 
profit  only,  and  that  they  place  their  money 
or  their  goods  wherever  the  prospect  of  gain 
is  gi'eatest  and  most  secure. 

There  may  be  cases,  however,  where 
private  business  or  scientific  enterprise  has 
made  some  discovery,  or  opened  up  some 
trade,  which  has  a  special  political  or  military 
value.  An  instance  would  be  that  of  the 
metal  tungsten,  used  for  hardening  steel, 
the  bulk  of  the  sources  of  which  are  said  to 
have  been  secured  by  Germans.  Such  cases, 
where  they  can  be  shown  to  exist,  might 
legitimately  be  removed  from  the  ordinary 
category  of  trade  for  our  present  discus- 
sion, and  classed  with  those  other  trades  in 
Germany  or  elsewhere  which  are  admittedly 
aided  and  encouraged  by  the  State,  in  part, 
for  military  considerations.  So  far  as  any 
State  for  "aggressive"  purposes  directs  its 
**  national  economy  "  in  such  a  way  as  to 
endanger    our    supplies    either    of   military 

6 


82  THE  NEW  PROTECTIONISM 


requisites  or  of  any  necessity  of  life  in  the 
event  of  war,  it  is  manifestly  the  duty  of  our 
State  to  take  whatever  means  are  necessary 
to  meet  such  "  aggression."    For  instance,  if 
it  were  necessary  to  secure  ourselves  against 
the  sudden  withdrawal  in  war-time  of  the 
supply  of  some  vitally  important  goods  in 
which  we  were  in  danger  of  complete  de- 
pendency upon  an  enemy,  it  would  be  quite 
legitimate  to  prohibit  the  entrance  of  such 
goods,  provided  that  we  were  able  to  establish 
a  domestic  substitute  under  conditions  which 
were  not  those  of  an  ordinary  "  protected  " 
trade.     There   are   various   ways   in   which 
this   could   be   done.      If  importation   was 
prohibited,  the  excessive  profits  which  "  pro- 
tected "  private  businesses  might  make  could 
be  checked  either  by  Excise  duties  or  by  a 
special  profit  tax,  or  by  some  such  regulation 
of  prices  to  consumers  as  is  attached  to  the 
working  of  gas  companies  and  other  semi- 
public  monopolies.     Or,  simpler  and  better 
still,  such  industries  could  be  established  and 
worked  as  public  monopolies.     This  would 


HOW  TO  MEET  TRADE  AGGRESSION     83 


be  for  various  reasons  the  more  desirable 
course.  For,  in  the  first  place,  in  most  if  not 
all  cases  where  real  danger  to  our  national 
defence  was  apprehended,  the  industry  would 
relate  closely  to  some  class  of  armaments. 
Now,  although  in  war  itself  it  may  be  neces- 
sary to  call  upon  private  engineering  firms 
to  supplement  the  State  supplies  of  arms,  it 
ought  clearly  to  be  the  function  of  the  State 
to  carry  on  the  ordinary  production  of  arms 
in  its  own  factories  and  workshops,  not 
allowing  great  private  vested  interests  in  war 
to  grow  up  wdthin  the  body  of  the  nation. 
If,  therefore,  the  aggressive  trade  policy  of 
any  foreign  State  threatens  to  deprive  our 
State  of  articles  essential  for  our  defensive 
services,  the  production  of  such  articles 
clearly  falls  within  the  proper  scope  of  State 
enterprise.  It  is  to  this  national  organiza- 
tion of  defensive  industries,  and  not  to 
tariffs,  that  we  should  look  for  our  defence. 

But  outside  this  restricted  circle  of  war 
re(juisites  there  are  a  nimiber  of  industries 
producing    trade    materials    or   consumable 


84  THE  NEW  PROTECTIONISM 

goods  which  we  have  "allowed"  to  pass  pre- 
dominantly or  completely  into  foreign  and 
sometimes  German  hands.  Four  articles  are 
especially  prominent  in  illustration  of  this 
economic  peril — dyes,  monazite,  tungsten, 
and  beet  sugar.  Now,  an  exceedingly  per- 
tinent commentary  on  these  articles  was 
made  in  a  letter  to  The  Times  of  March  30 
by  Dr.  F.  A.  Mason,  who  remarks:  "The 
four  subjects  noted  —  tungsten  for  steel- 
making,  monazite  for  the  production  of  gas 
mantles,  synthetic  indigo,  and  beet  sugar — 
do  not  appear  at  first  sight  to  bear  much 
relation  to  one  another,  but  their  mention 
with  regard  to  German  industrial  success 
and  British  failure  is  no  fortuitous  one.  The 
link  connecting  them  all  may  be  summed 
up  in  one  word — chemistry.  There  is  no 
branch  of  science,  pure  or  applied,  which  has 
been  so  shamefully  neglected  in  the  past  as 
chemistry.  Practically  all  the  important  in- 
dustries in  which  we  have  been  left  behind 
by  Germany  have  been  those  in  which  the 
chemist   is   predominant."     Admittedly   all 


HOW  TO  MEET  TRADE  AGGRESSION     85 

the  industries  in  which  Germans  are  pre- 
eminent are  those  in  which  science,  educa- 
tion, and  business  organization,  count  heavily. 
In  order  to  defend  ourselves,  the  obvious 
method  is  to  cultivate  these  factors  of  success. 
Will  a  tariff  help  us  here  ?  The  general  and 
natural  tendency  of  Protection  is  to  dis- 
courage energy,  experiment,  and  progress,  in 
technical  and  business  methods.  To  decline 
competition  and  to  shirk  behind  a  tariff 
wall  is  not  only  a  cowardly,  but  a  singularly 
foolish,  way  of  meeting  the  superiority  of 
our  trade  rivals  in  certain  industries.  If 
this  superiority  is  built  on  brains,  science, 
and  organization,  we  had  better  build  our 
"  defence  "  upon  the  same  basis.  Only  thus 
can  be  got  a  really  reliable  defence.  For  the 
most  striking  fact  in  this  type  of  scientific 
industry  is  that  it  is  continually  growing 
and  changing.  The  so-called  *'  key-industry  " 
of  to-day  will  not  be  the  ''  key-industry  "  of 
to-morrow.  W^ar  is  an  eye-opener  in  this 
matter.  Sir  Hugh  Bell,  in  writing  on  the 
subject,  makes  a  criticism  which  1  commend 


86  THE  NEW  PROTECTIONISM 


to  *>hort-sighted  Tariff  "  Reformers,"  whose 
instrument  would  be  always  lagging  behind 
the  real  need  of  the  nation :  "  Who  can  say 
what,  when  war  is  next  waged  by  mankind, 
will  be  the  '  key-industry '  ?  Peradventure 
some  delicate  alloy  of  steel  involving  the  use 
of  a  rare  metal.  Shall  we  '  protect '  (heaven 
save  the  mark !)  all  rare  metal  industries, 
lest  one  of  them  should  be  found  the  way 
to  the  dominion  of  the  air,  as  may  easily  be 
the  case?"* 

Would  not  it  be  safer  to  set  about  im- 
proving our  processes  of  education,  so  that 
we  may  have  at  least  an  equal  chance  with 
Germany,  or  any  other  nation,  in  discovering 
and  developing  new  "  key-industries  "  ? 

*  ^^  Trade  after  the  War,"  April,  I916. 


CHAPTER  VII 

THE  CASE  OF  AGRICULTURE 

There  is  one  great  fundamental  industry 
which  deserves  separate  consideration  in  this 
problem  of  economic  defence — agriculture. 
The  belief  that  the  decline  of  farming  is 
an  injurious  factor  in  our  recent  history 
is  by  no  means  based  exclusively  on  con- 
siderations of  militarism  and  defence.  The 
decay  of  rural  industries  and  the  concentra- 
tion of  our  population  in  great  cities,  re- 
moved from  wholesome  regular  contact  with 
Nature  and  devoted  more  and  more  exclu- 
sively to  mechanical  and  commercial  pur- 
suits, have  been  sources  of  deep  concern 
for  hygienic,  aesthetic,  and  moral  reasons. 
Those  concerned  for  the  quantity  and  quality 
of  our  population  have  pointed  with  alarm 
to  the  dwindling  proportion  of  the  popula- 

87 


88  THE  NEW  PROTECTIONISM 


tion  living  in  the  country,  where  the  birth- 
rate remains  higher  and  the  infantile 
mortality  lower  than  in  the  towns,  and 
where,  in  spite  of  a  selective  drawing  of 
the  best  stock  into  towns,  the  general 
standard  of  health  and  longevity  is  higher. 
These  general  criticisms  have,  however, 
been  greatly  reinforced  by  considerations  of 
national  defence.  Larger  families  born  and 
bred  in  the  country  are  wanted  for  cannon 
food.  And  the  degree  of  our  dependence 
upon  overseas  supply  of  food  is  now  more 
than  ever  realized  as  a  national  danger. 

It  is  natural,  therefore,  that  various  pro- 
posals for  stimulating  agriculture,  keeping 
population  on  the  soil,  and  improving  the 
conditions  of  life  in  our  villages,  should  be 
to  the  fore.  This  is  no  place  for  a  general 
discussion  of  the  merits  of  this  branch  of 
"  social  reform."  It  must  suffice  to  note 
the  part  Protectionism  is  likely  to  play 
in  it. 

By  character  and  tradition  the  landowners 
and   farmers   of  this  country,  as   of  many 


THE  CASE  OF  AGRICULTURE  89 


others,  are  Protectionists.  But  at  the 
present  time  they  are  the  more  incited  to 
seek  Governmental  aid  in  the  form  of  tariffs, 
bounties,  remissions  of  rating,  etc.,  because 
the  recent  pohtical  campaign,  to  which 
Mr.  George  was  seeking  to  commit  the 
country  before  the  war,  was  causing  them 
serious  alarm.  If  they  were  to  be  called 
upon  to  raise  agricultural  wages  to  a  decent 
minimum,  to  assist  in  the  creation  of  "  free  " 
cottages,  and  the  estabUshment  on  a  large 
scale  of  small  holdings,  and  to  assent  to 
other  means  of  raising  the  independence  of 
the  labourers,  they  were  impelled  more 
urgently  to  demand  from  the  Government 
some  simple  guarantees  that  their  rents  and 
profits  shall  not  be  swallowed  up  by  these 
improvements  of  the  conditions  of  labour. 
They  must  be  secured  against  the  incal- 
culable inrushes  of  foreign  foods  into  our 
markets.  Prices  of  food  nmst  be  kept  at  a 
level  which  will  make  farming  possible,  and 
give  the  farmers  sufficient  security  of  out- 
look to  "do  their  best  by  the  land.'     To 


90  THE  NEW  PROTECTIONISM 

keep  out  foreign  foods  is  the  expedient 
generally  advocated,  and  though  town  Pro- 
tectionists have  learnt  the  lesson  of  the 
1906  and  1910  elections,  and  avoid  com- 
mitting themselves  to  any  sort  of  food  tax, 
the  landed  interests  are  not  easily  shaken 
from  their  fixed  policy.  Though  the  pro- 
gramme of  the  London  Chamber  of  Com- 
merce allows  most  foods  to  come  in  free,  no 
political  Protectionism,  having  regard  to 
considerations  of  Imperial  union,  would  be 
likely  to  endorse  this  liberty.  This  simple 
claim  of  the  farmer  is  likely  to  remain  a 
millstone  on  the  neck  of  the  New  Pro- 
tectionism. 

It  would,  of  course,  be  possible  to  deal 
with  the  agricultural  claims  by  way  of 
bounties  instead  of  tariffs.  Sir  L.  Chiozza 
Money  has  recently  revived  this  proposal, 
urging  that  a  bounty  upon  agricultural 
produce  should  be  applied  to  stimulate  and 
organize  our  home  supplies.  Imported 
foods  might  enter  free  of  duty  as  before, 
but  a  bounty  on  home-grown  foods  would 


THE  CASE  OF  AGRICULTURE         91 

put  more  of  our  land  into  effective  use,  so 
increasing  the  proportion  of  our  home 
supply.  Some  of  the  difficulties  raised  by 
the  bounty  policy,  as  usually  advocated,  are 
met  by  the  more  audacious  scheme  outlined 
by  Sir  Leo,*  who  would  make  his  bounties  an 
instrument  of  a  general  organization  of  our 
agriculture  by  the  State.  The  comparative 
failure  of  the  rising  price  of  wheat  in  recent 
years  to  stimulate  an  increase  of  the 
acreage  under  wheat  is  doubtless  attribut- 
able partly  to  the  slowness  of  the  agricultural 
mind  to  respond  to  economic  stimuli,  partly 
to  the  insecurity  of  tenure  of  most  farmers, 
partly  to  the  fact  that  other  food  prices 
have  also  risen,  and  last,  not  least,  to  the 
fact  that  the  gain  from  higher  prices  is 
liable  to  be  taken  by  landowners  in  higher 
rent.  If  anything  effective  is  to  be  done 
along  these  lines,  agriculture  as  a  whole 
must  be  brought  under  a  general  State 
surveillance  ;  there  must  be  security  for  the 
maintenance  of  the  higher  profits  of  farming; 

*    Westminster  Gazette,  May  S\,  I916. 


92  THE  NEW  PROTECTIONISM 


the  labourer,  as  well  as  the  farmer,  must 
get  his  share  of  agricultural  prosperity. 

"  J  picture  the  State  as  commanding  the 
whole  question  of  food-supply,  just  as  it  has 
commanded  the  sugar-supply  in  this  war,  and 
just  as  it  has  partly  commanded  the  meat- 
supply  in  this  war.  My  conception  is  that 
the  State,  having  after  due  consideration 
decided  to  apply  varying  proportions  of 
British  soil  to  different  agricultural  purposes, 
shall  buy  up  and  control  the  home  supply, 
paying  to  the  producers  such  a  price  as  will 
enable  them  to  maintain  themselves  at  a 
proper  standard  of  life.  The  minimum  wage 
in  agriculture  becomes  part  and  parcel  of 
the  plan."  "Thus  controlling  the  British 
output  of,  let  us  say,  grain,  meat,  and  dairy 
produce,  the  Government  would  next  pro- 
ceed to  make  arrangements  with  the  British 
Dominions  overseas  to  purchase  from  them 
their  surplus  productions  of  wheat."  "As 
to  other  supplies,  the  food  surpluses  of 
Argentina  or  the  United  States  or  Denmark, 
there  is  no  reason  why  the  British  Govern- 


THE  CASE  OF  AGRICULTURE  93 

ment  should  not  act  similarly,  or  alterna- 
tively admit  such  foreign  produce  at  some 
moderate  rate  of  duty." 

In  order,  therefore,  to  meet  the  obvious 
defects  of  an  ordinary  bounty  scheme,  it  is 
proposed  to  establish  a  State  monopoly  in 
the  supply  of  food.  A  State  department  is 
apparently  to  supersede  all  the  present  regu- 
lative motives  of  supply  and  of  demand, 
fixing  the  quantity  of  all  the  different  sorts 
of  uses  to  which  our  land  is  to  be  put,  and 
the  quantity  of  "  surpluses  "  of  various  kinds 
to  be  bought,  first,  from  our  different 
Dominions,  and,  secondly,  from  different 
foreign  countries ;  finally  it  is  to  control  an 
intricate  machinery  of  distribution  in  order 
to  supply  to  every  consumer  in  the  country 
the  State  rations  which  it  has  been  calculated 
he  ought  to  be  allowed  to  buy  and  to  con- 
sume. For  if  the  State  organizes  the  supply 
of  foods,  fixing  tlie  prices  it  pays  to  the  home, 
the  colonial,  and  the  foreign  producer,  and 
the  quantities  it  buys  from  each,  and  fixing, 
on  the  other  hand,  the  selling  prices  to  the 


94  THE  NEW  PROTECTIONISM 


consumer  (including  the  manufacture  in  the 
numerous  food-making  industries),  the  nation 
is  virtually  put  on  rations.  And  this  not  as 
a  temporary  war  but  as  a  permanent  peace 
measure ! 

In  a  parenthetic  paragraph  Sir  Leo  ex- 
presses his  belief  that  it  would  be  "  wise  and 
profitable  "  for  the  State  to  acquire  by  pur- 
chase the  whole  of  our  agricultural  lands. 
Indeed,  it  is  tolerably  obvious  that,  unless 
this  step  were  taken,  the  bulk  of  the  bounty 
money  paid  by  the  State  for  high-priced 
agricultural  produce  would  pass  into  the 
hands  of  landlords  in  raised  rents. 

But  surely  it  is  a  rxductio  ad  absurdum  of 
the  ''  bounty "  system  when  it  is  seen  to 
require  for  its  defence  the  nationalization  of 
land  and  the  socialization  of  the  entire  food 
trade  of  the  country.  For  Socialists  have 
generally  and  rightly  recognized  that  agri- 
culture is  the  branch  of  industry  least 
adapted  for  direct  State  administration,  by 
reason  of  the  infinite  variety  of  local  con- 
ditions    and     the    other     irregularities    of 


THE  CASE  OF  AGRICULTURE  95 

materials  and  processes  which  render  it  re- 
fractory to  rigorous  routine.  Most  of  those 
who  favour  the  ownership  and  control  by  the 
State  of  railroads,  mines,  and  the  great  staple 
manufactures,  recognize  that  the  direct  in- 
centives of  private  individual  gain  and  liberty 
of  working  are  essential  to  get  the  best  out 
the  soil. 

That  the  State  can  do  much  to  stimulate 
and  improve  agriculture  must  be  admitted. 
But  the  assistance  does  not  lie  along  the 
road  of  tariffs  or  bounties.  The  real  need 
is  to  release  agriculture  from  the  rusty 
chains  of  medieval  land  tenure,  and  to  place 
it  on  a  modern  business  footing,  affording 
to  the  employer  and  the  worker  the  hopes 
and  prospects  of  gain  requisite  to  evoke 
their  intelligent  and  efficient  industry.  Re- 
form of  land  tenure,  scientific  and  business 
training  for  the  farmer's  son,  skilled  crafts- 
man's wages  and  personal  liberty  for  the 
wage-earner  (with  the  option  of  an  inde- 
pendent hvelihood  upon  a  small  holding), 
improved  and  cheapened  transport  for  agri- 


96  THE  NEW  PROTECTIONISM 


cultural  produce,  local  co-operative  associ- 
ations for  marketing  and  for  credit — these 
are  the  chief  desiderata  for  enlarging  the 
yield  of  British  agriculture.  The  State 
ought  to  contribute  liberally  to  these  pur- 
poses— legislatively,  by  removing  the  decay- 
ing relics  of  feudal  tenure  ;  administratively, 
by  the  public  services  of  education,  trans- 
port, and  cheap  credit. 

To  take  money  from  the  consuming  public 
or  from  the  gains  of  other  industries  in  order 
therewith  to  subsidize  a  favoured  industry 
of  agriculture,  by  means  of  tariffs  or  boun- 
ties, is  bad  politics  and  worse  economics. 

Finally,  regarded  as  defence,  the  pro- 
tection of  agriculture  is  fatally  defective. 
Although  it  may  theoretically  be  possible 
to  show  that,  by  a  general  application  of 
modern  science  and  intensive  cultivation,  a 
sufficient  quantity  of  food  could  be  raised 
upon  our  national  soil  to  support  our  whole 
population,  nobody  seriously  supposes  that 
this  can  or  will  be  done.  The  utmost  that 
is  looked  for  as  the  result  of  Protection  or 


THE  CASE  OF  AGRICULTURE         9' 


agricultural  reform  is  some  not  very  marked 
reduction  of  our  dependence  upon  overseas 
supplies.  We  cannot  hope,  with  our  great 
and  still  growing  population,  to  be  able  in 
the  future  to  feed  ourselves  in  the  event  of 
a  war  in  which  we  might  be  cut  off  from 
overseas  suppHes.  Nor  will  considerations 
of  defence  encourage  us  to  rely  upon  the 
Empire  for  all  the  surplus  food-supplies  we 
shall  continue  to  require.  For  statistics 
show  that  even  in  recent  years,  with  the 
immense  development  of  Canadian  resources, 
the  Empire  does  not  furnish  us,  in  ordinary 
years,  with  much  more  than  a  third  of  the 
imported  foods  we  require.  The  statistics 
of  our  imports  of  wheat  and  flour*  show 
how  precarious  it  would  be  for  us  to  rely 
upon  Imperial  resources,  which  in  a  bad 
year  cannot  supply  us  with  more  than  a 
quarter  of  our  needs.  The  large  number 
and  variety  of  the  foreign  sources  of  supply 
upon  which  hitherto  we  have  been  drawing 
are  seen  to  be  the  essential  conditions  of  a 

*  See  table  on  p.  98. 

7 


98 


THE  NEW  PROTECTIONISM 


regular  and  reliable  food- supply  for  our 
population.  Any  weakening  or  reduction 
of  these  sources  of  supply,  by  tampering 
with  our  freedom  of  imports,  under  the 
pretext  of  Imperial  union  or  preference  for 
Allies,  would  imperil  our  national  existence. 


*  Great  Britain's  Imports  of  Wheat  and  Flour 

PER  Cent. 


1915. 

1912. 

1908. 

1907. 

1906. 

190  i.    ! 

British  Empire  : 

Canada 

23-62 

21-91 

16-42 

13-15 

11-79 

7-10  ! 

India 

13-53 

20-53 

2-70 

15-81 

11-22 

21-60  1 

Australia 

0-18 

10-40 

5-35 

7-36 

7-57 

9-62 

New  Zealand 

Total  British) 
Empire        / 

Foreign  Countries  : 

0-23 

0-07 

0-29 

37-33 

53-07 

24-47 

36-32 

30-65 

38-61 

United  States 

49  41 

20 

88 

36 

28 

28-94 

32-53 

16-20 

Russia 

0-77 

7 

26 

4 

72 

9-89 

14-30 

20-37 

Argentina  ... 

11  90 

15 

30 

29 

18 

19-00 

17-20 

18-48 

Roumania  ... 

0 

64 

1 

18 

2-20 

2-27 

0-94 

France        

0-09 

0 

45 

0 

46 

0-87 

0-81 

1-88 

Austro-Hungary  ... 

0 

13 

0 

32 

0-52 

0-77 

0-87 

Bulgaria     ... 

0 

10 

0 

09 

0-36 

0  45 

0-13 

Turkey       

0  02 

0 

26 

0 

32 

0-40 

014 

0-31 

Chile          

0 

53 

2 

03 

0-07 

0-78 

Germany    ... 

0 

67 

0 

57 

0-48 

0-31 

0-52 

\ Other  Countries 
Total 

0-48 

0-71 

0-38 

0-95 

0-57 

0-91 

62-67 

46-93 

75-53 

63-68 

69-35 

61-39 

Statist,  June  17,  1916. 


THE  CASE  OF  AGRICULTURE  99 


The  advantages  Great  Britain  possesses 
in  her  natural  resources,  her  situation,  her 
internal  and  external  means  of  transport, 
her  volume  of  capital,  are  greater  than  those 
of  Germany.  It  is  in  the  intelligent  organi- 
zation and  direction  of  these  advantages 
that  we  have  fallen  behind.  Better  scientific, 
teclmical,  commercial,  and  general  educa- 
tion among  all  classes  of  our  people,  trained 
intelligence  in  industry,  is  the  first  desider- 
atum. But  in  order  to  get  this  use  from 
education  we  must  first  believe  in  educa- 
tion. Faith  must  precede  works.  This  is 
a  hard  saying  for  a  people  which  has  selected 
for  one  of  its  few  public  economies  in  war- 
time a  "  letting  down "  of  all  its  educa- 
tional services. 

Our  numerous  colonies  and  protectorates 
scattered  over  the  world  should  give  our 
men  of  commerce  an  immense  advantasre 
over  other  nations,  as  outlook  towers  and 
vantage  grounds  for  trade  and  for  invest- 
ments. But  the  modern  successful  trader 
must  learn  languages,  mix  on  terms  of  easy 


100  THE  NEW  PROTECTIONISM 


intercourse  with  foreigners  of  different  races, 
colours,  and  grades  of  civilization,  learn  their 
habits  and  material  needs,  and  the  best 
ways  of  satisfying  them  :  he  must  study  his 
potential  markets  in  detail.  If  he  is  too 
proud  or  too  indolent  to  do  this,  he  will 
be  *'  left "  behind  by  Germans,  Dutchmen, 
or  Swiss,  who  will  better  conform  to  the 
requirements  of  the  situation. 

As  for  our  complaints  that  the  German 
Consulates  render  so  much  more  valuable 
assistance  to  their  traders  than  do  ours,  the 
remedy  is  obvious.  It  consists  in  a  thorough 
reform  of  the  selection,  the  personnel,  and 
the  work,  of  our  Consulates.  It  should  be 
their  function  to  make  a  continuous  organized 
study  of  commercial  opportunities,  to  follow 
the  industrial  developments  of  the  country, 
to  know  what  public  or  private  contracts 
are  available  for  foreign  competition,  and  to 
lose  no  time  in  communicating  this  informa- 
tion to  the  home  Government  for  circulation 
in  this  country. 

Finally,    we    must    meet    the    superior 


THE  CASE  OF  AGRICULTURE        101 


financial  penetration  by  means  of  which  the 
great     German     banks    have    operated    in 
foreign  countries,  not  by  silly  accusations  of 
**  aggression,"  but  by  intelligent  imitation. 
Credit  is  the  great  instrument  of  expanding 
trade.     We  have  in   Great  Britain  a  huge 
latent  reservoir  of  unused  or  ill-used  credit. 
Though  our  banks  are  not  in  their  existing 
structure  adapted  to  the  more  adventurous 
work   done    by    such    institutions    as    the 
Deutsche  Bank  in  launching  and  financing 
great    industrial    and    trading    enterprises, 
other  modes  of  organizing  credit  for  such 
purposes  are  open  to  us.     One  of  the  reve- 
lations   of  the    war   has   been   that  of  the 
great  national  reserve  of  credit  available  in 
time  of  need  for  galvanizing  into  life  the 
stiffening  sinews  of  our  banking  and  financial 
system,  and  for  supporting  the  vast  expen- 
diture upon  the  war  of  our  coimtry  and  our 
Allies.     The  establishment  of  Credit  Insti- 
tutions in  this  country,  furnished  with  suffi- 
cient capital  to  play  the  part  taken  by  the 
German  banks  in  initiating  and  maintaining 


102  THE  NEW  PROTECTIONISM 


new  projects  whose  soundness  has  been 
attested  by  expert  inquiry,  is  a  proposition 
which  is  ah-eady  commending  itself  to 
enhghtened  financiers.  What  part  the  joint- 
stock  banks  may  take  in  such  an  institution, 
what  part  the  Government,  is  a  matter  for 
discussion.  But  the  utihty,  even  the  neces- 
sity, of  some  such  organization  of  credit,  if 
our  commercial  and  investing  classes  are 
to  compete  on  equal  terms  with  those  of 
Germany,  is  generally  admitted. 

When,  then,  we  inquire  what  the  weapons 
are  with  which  Germany  has  made  her 
great  **  invasions  "  in  the  world  markets  and 
international  finance,  we  find  that  they  are 
weapons  of  organization  forged  by  brains, 
will,  and  industry,  and  are  within  our  grasp 
if  we  also  have  the  brains  and  will  and 
industry  to  forge  them.  If  we  have  not, 
the  cowardly  protection  of  a  tariff  will  not 
serve  us  ;  for,  instead  of  acting  as  a  stimulus 
to  efficiency  and  enterprise,  it  will  be  a 
screen  for  slackness  and  incompetence. 


CHAPTER  VIII 

FREE  TRADE  AS  A  POLICY 

The  attempt  to  discredit  Free  Trade  as 
a  policy  which  has  endangered  this  country 
in  time  of  war  rests  on  a  particularly  reckless 
perversion  of  the  facts.  For  the  course  of 
the  war  has  shown  that  the  staying  power 
and  fighting  strength  of  Great  Britain  de- 
pend in  the  last  resort  upon  our  naval  and 
mercantile  supremacy  at  sea  and  our 
dominant  position  in  world  commerce  and 
finance.  Now,  these  factors  are  themselves 
the  products  and  expressions  of  our  Free 
Trade  policy.  Our  ownership  of  half  the 
shipping  of  the  world  and  our  control  of 
commerce  over  the  great  world-routes  could 
only  have  been  developed  and  maintained 
by  our  policy  of  free  ports  and  markets. 
The    vital    importance   of    our    mcrcaiiLile 

103 


■^i»»«llMM.MMJ  JWIHiB  '■'■llliJ,m|i|  WB'   ..igBWPIIWIIH.i  ai«BHWgr»MMaPg^lL«WlJCIIU.^liieWBiBMiMBngirggXMJM^MIJJAI)IJl  wjimwuuii 

104  THE  NEAV  PROTECTIONISM 


marine  for  transport  and  other  subsidiary 
war  purposes,  as  well  as  for  the  maintenance 
of  necessary  supplies  for  the  needs  of  our 
civil  population,  requires  no  argument.  The 
swift,  full,  and  easy  access  to  the  markets 
of  neutral  countries,  for  the  supply  of  the 
requisites  of  war  and  peace  to  ourselves  and 
our  Allies,  has  been  the  greatest,  and  will 
probably  prove  the  determinant,  advantage 
we  possess  over  our  enemies  in  a  protracted 
war.  This  advantage  is  the  direct  outcome 
of  Free  Trade.  The  good-will  shown  to  our 
cause  by  most  neutral  nations  is  not  at- 
tributable entirely,  as  we  are  prone  to  think, 
to  the  justice  of  our  cause  or  the  considerate- 
ness  of  our  conduct  on  the  sea.  To  a  large 
extent  it  is  a  half-conscious  acknowledgment 
of  the  superior  liberality  of  our  commercial 
policy. 

Not  less  important  is  the  contribution  of 
Free  Trade  to  the  financial  strength  that 
has  enabled  us  to  bear  the  great  economic 
burdens  of  a  war  in  which  we  have  been 
able  to  render  invaluable  aid  in  goods  and 


FREE  TRADE  AS    A  POLICY         105 

money  to  our  Continental  Allies.  It  is  not 
merely  that  Free  Trade  has  developed  our 
industry  and  commerce  on  sound  and  profit- 
able lines,  so  enriching  the  nation  as  to 
enable  it  to  find  for  a  great  emergency  the 
huge  financial  resources  we  have  provided 
in  the  last  two  years.  But  the  facts  that 
London  has  been  the  financial  centre  for  the 
entire  world,  and  that  the  financial  direction 
of  world-commerce  and  of  the  distribution 
of  the  savings  of  the  world  has  been  mainly 
in  our  hands,  are  indissolubly  connected  with 
Free  Trade.  Now,  this  supremacy  has  been 
of  incalculable  value  in  helping  us  to  finance 
the  war.  We  have  been  able  to  draw  in  for 
our  immediate  needs  huge  liquid  funds  of 
capital  laid  out  in  financing  world-commerce, 
and  to  establish  relations  of  credit  and  ex- 
change in  the  LTnited  States  and  elsewliere, 
resting  ultimately  upon  our  financial  and 
commercial  prestige.  Should  we  revert  to 
Protection,  and  break  Europe  into  two  rival 
economic  systems — throwing  many  of  the 
neutrals  into  close  fiscal  relations  with  the 


106  THE  NEW  PROTECTIONISM 


Central  Powers,  the  unquestioned  supremacy 
of  the  "  bill  on  London  "  would  be  lost,  and 
a  most  injurious  blow  would  have  been  in- 
flicted on  our  control  of  world  finance  and 
commerce.  Setting  on  one  side  the  general 
effect  of  such  a  weakening  of  our  national 
resources,  we  cannot  fail  to  recognize  how 
damaging  this  loss  would  be  to  the  cause 
of  national  defence  in  the  event  of  another 
war. 

"  But,  at  any  rate,"  it  is  sometimes  said, 
"  you  must  admit  that  Free  Trade  has  failed 
as  a  pacific  agency."  We  can  admit  no  such 
thing.  If  the  example  set  by  this  nation 
had  been  followed  by  the  other  Powers,  and 
nevertheless  this  world-war  had  broken  out, 
it  might  have  been  contended  that  Free 
Trade  had  failed.  But  why  does  it  seem 
even  plausible  to  suggest  that,  because  a 
number  of  Protectionist  nations  quarrel  and 
come  to  blows,  and  Free  Trade  Britain  is 
drawn  in.  Free  Trade  and  not  Protection 
has  failed  ?  No  one  who  has  followed  recent 
Continental  history  can  ignore  the  fact  that 


FREE  TRADE  AS  A  POLICY  107 


tariff  wars  between  Germany  and  Russia, 
Austria  and  Italy,  and  the  oppressive  tariff 
placed  by  Austria  on  Servia,  have  been  active 
influences  in  fomenting  national  hostilities 
and  in  stimulating  preparations  for  this 
war. 

British   Free  Trade  could  not  keep   the 
world  at  peace.     But  it  has  helped  to  keep 
Britain   at    peace.      Can    anyone    seriously 
suppose  that  in  this  dangerous  world  Great 
Britain  would  have  been  permitted  to  gain 
and  to  hold  so  huge  a  territorial  Empire 
scattered  over  the  wide  world,  or  to  wield, 
virtually  uncontested  for  so  long  a  time,  the 
supremacy  of  the  seas,  had  not  the  natural 
jealousy   and   envy  of  other   Powers   been 
abated  by  the  freedom  and  equality  of  com- 
merce which  we  gave  to  traders  of  all  nations  ? 
The  closer  Protection  and  the  discriminative 
tariffs  of  our  self-governing  dominions,  taken 
toorether  with   the  threats  of  a  withdrawal 
of  our  free  Imperial  markets,  are  among  the 
admitted  causes  of  the  later  war-policy  of 
Germany.      If  we    had   claimed    the    most 


nnmifKNBMi 


108  THE  NEW  PROTECTIONISM 


profitable  fifth  of  the  whole  inhabited  world 
for  our  exclusive  markets,  and  had  treated 
the  manufacturers  and  traders  of  all  other 
rising  commercial  nations  as  trespassers,  it 
cannot  be  doubted  that  a  combination  of 
European  nations  would  long  ago  have 
banded  themselves  against  this  arrogant 
monopoly. 

Protection  is  not  a  good  defence  either  as 
a  normal  trade  policy  or  in  war-time.  If 
any  simple  test  is  wanted,  it  is  furnished  in 
the  fact  that  as  soon  as  the  war  started  the 
great  Protectionist  belligerents,  one  after 
another,  dropped  their  food  tariffs.  Italy 
reduced  her  duties  on  food  in  October,  1914, 
and  abolished  her  corn  tax  in  the  follow- 
ing February.  In  October,  1914,  Austria 
abolished  her  corn  tax.  In  September,  1914, 
the  German  duties  on  bread,  beans,  butter, 
eggs,  poultry,  prepared  foods,  cereals  and 
fiour,  meat  and  fish,  were  abolished.  So 
much  for  the  defence  value  of  Protection 
in  war-time !  And  yet  these  countries  are 
comparatively   self-sufficing   in   their   food- 


FREE  TRADE  AS  A  POLICY  109 


supply.     How  much  worse  a  defence  would 
a  tariff  prove  for  us  ! 

But  if  Protection  fails  to  provide  that 
self-sufficiency  in  war-time,  which  is  its 
ostensible  object,  what  shall  be  said  of  it 
as  a  method  of  war  finance  ?  While  Great 
Britain  by  a  series  of  increases  of  direct 
taxation,  almost  wholly  falling  upon  cur- 
rent income  has  raised  the  revenue  from  a 
pre-war  level  of  175  millions  to  a  figure 
estimated  in  1916-17  to  amount  to  509 
millions,  what  have  the  Protectionist  nations 
done  towards  meeting  their  costs  of  war  out 
of  current  revenue  ?  Virtually  nothing.  The 
speech  of  Dr.  HelfFerich,  Finance  Minister 
for  Germany,  in  the  Reichstag,  August  20, 
1915,  is  a  sufficient  testimony  to  the  help- 
lessness of  Protectionist  finance  to  meet 
emergencies :  "  I  explained  in  March  the 
reasons  which  determined  the  German 
Government  against  the  imposition  of  war 
taxes  during  the  period  of  the  war.  These 
reasons  will  stand.  We  do  not  desire  to 
increase  by  taxation  the  heavy  burden  which 


110  THE  NEW  PROTECTIONISM 


war  casts  upon  our  people,  so  long  as  it  is 
not  absolutely  necessary.  As  things  are, 
the  only  method  seems  to  be  to  leave  the 
settlement  of  the  war-bill  to  the  conclusion 
of  peace  and  the  time  after  peace  has  been 
concluded."  In  other  words,  Germany  has 
been  obliged  to  borrow  every  penny  she  has 
spent  upon  the  war.  Nor  is  that  all.  This 
year  (1916),  in  order  to  meet  the  growing 
interest  on  the  debt,  Dr.  HelfFerich  pro- 
posed taxes  estimated  to  yield  24  millions  a 
year.  But  that  sum  will  furnish  a  good  deal 
less  than  one-quarter  of  the  interest  of  the 
war- borrowing  actually  incurred.  Worse  than 
that,  closer  inspection  makes  it  evident  that 
with  this  new  taxation  Germany  will  still  be 
unable,  not  merely  to  contribute  to  the  cur- 
rent costs  of  war,  but  to  find  the  revenue  re- 
quired for  her  imperial  expenditure  upon  an 
ordinary  peace  footing.  As  the  Cobden  Club 
shows  in  an  able  leaflet :  "  This  means  not 
only  that  Germany  has  not  paid  a  penny 
out  of  income  for  the  war,  but  that  she 
has  been  obliged  to  borrow  about  half  her 


FREE  TRADE  AS  A  POLICY  111 


ordinary  peace  expenditure  as  well."     The 
same  story  is  true  of  the  other  belligerent 
countries,  and  for  the  same  reason.     Tariffs 
are  broken  reeds  for  war  emergencies.  Coun- 
tries that  trust  to  them  for  revenue  in  war- 
time are  foredoomed  to  failure.     For  just 
when  more  money  is  wanted  less  is  supplied. 
In  most  belligerent  countries  import  trade 
is  heavily  diminished,  and  w^ith  this  diminu- 
tion the  yield  of  import  duties  falls.     The 
rates   cannot  be  increased  at  a  time  when 
restricted  supplies   are   raising  prices.     On 
the  contrary,  duties  upon  necessaries  must 
be   reduced    or    repealed,    as    we    see    has 
actually   happened.     This   financial   defect, 
perilous  to  national  defence,  is  inherent  in 
a  protective  system.     It  is  no  mere  chance 
that   has    imparted    so   much   elasticity   of 
revenue    to    our     national     finance.      The 
simple  reason  is  that,  wiiereas  in  war  Ger- 
many, France,  Russia,  Italy,  rely  upon  in- 
direct  taxes   for   the   great    bulk    of   their 
current  revenue,  this  country  is  raising  72 
per  cent,  of  her  revenue  by  direct  taxation. 


112  THE  NEW  PROTECTIONISM 

Free  Trade  has  enabled  us  not  merely  to 
make  a  considerable  and  growing  contribu- 
tion to  our  own  current  war  expenditure, 
but  to  undertake  the  added  burden  of  find- 
ing huge  sums  for  the  assistance  of  our  Allies. 
Only  by  means  of  the  immense  and  various 
commerce  with  foreign  countries,  built  up 
by  our  habitual  policy  of  free  markets,  by 
the  predominant  power  of  our  navy  and 
mercantile  marine — itself  at  once  the  pro- 
duct and  the  support  of  our  free  markets — 
and  by  the  vast  resources  of  credit  and 
financial  machinery  established  for  the  con- 
duct of  this  commerce,  could  Great  Britain 
have  made  what  will  prove  to  be  the  deter- 
minant contribution  to  the  resistance  by 
which  the  superior  military  preparations  of 
Germany  will  be  worn  down. 


CHAPTER  IX 

THE    OPEN    DOOR 

So  far  I  have  discussed  the  New  Protec- 
tionism as  a  compHcated  form  of  folly. 
But  it  is  more  than  that.  It  is  a  crime — I 
had  almost  written  the  crime  —  against 
civilization.  For  its  effect,  as  its  intention, 
would  be  to  perpetuate  the  present  strife  by 
stamping  the  divisions  made  for  war  upon 
the  world  of  commerce  afterwards.  Whereas 
the  whole  trend  of  civilization  has  been  to 
bind  the  peoples  of  the  world  into  closer 
unity  of  interests  and  activities  by  the  growl- 
ing interdependence  of  commerce,  these  pro- 
posals are  directed  to  a  reversal  of  the 
movement.  Not  merely  do  tliey  seek  to 
cut  across  the  whole  delicate  network  of 
commercial  and  human  intercourse,  but  tliey 

make  precisely  that  severance  which  is  most 

113  8 


114  THE  NEW  PROTECTIONISM 


injurious  to  the  future  of  humanity.  To 
break  Europe  into  two  hostile  and  rival 
economic  bodies,  intriguing  against  one 
another  in  all  the  neutral  countries  of  the 
world,  would  be  to  endow  with  permanency 
the  political  system  of  contending  alliances, 
which  has  been  the  chief  cause  of  past  in- 
security. This  political  antagonism  would 
be  loaded  with  economic  interests  which, 
once  established,  would  be  very  difficult  to 
displace.  The  question  of  the  just  deserts 
of  Germany  and  the  desire  to  impose  upon 
her  economic  punishment  are  not  a  real 
issue.  For  we  have  seen  that  the  constitu- 
tion and  working  of  modern  commerce  are 
such  as  to  disable  Protection,  or  other  modes 
of  commercial  severance,  from  inflicting  any 
injury  which  does  not  equally  recoil  upon 
the  party  inflicting  it.  Nor  are  the  private 
sensibilities  and  animosities  of  Britons  who 
desire  to  have  no  commercial  dealings  in 
the  future  with  Germany  in  question.  No 
trading  firm  or  individual  in  this  country  is 
precluded  from  putting  into  operation  on  his 


THE  OFEN  DOOR  115 

own  behalf  a  complete  boycott  of  German 
goods.  It  is  his  desire  to  impose  his  policy 
upon  other  firms  and  other  persons,  who 
may  still  wish  to  seek  their  advantage  by 
buying  and  selling  in  tlie  best  market  that 
is  in  question. 

The  adoption  of  a  State  policy  which,  by 
stopping  all  healing  intercourse  between  the 
members  of  the  belligerent  groups,  w^ould 
keep  alive  and  exacerbate  all  the  bitterest 
memories  of  war,  would  be  nothing  short 
of  treason  against  the  cause  of  civilization. 
For  commerce  has  always  been  the  greatest 
civilizer  of  mankind.  All  other  fruits  of 
civilization  have  travelled  along  trade  routes. 
The  caravans  which  crossed  the  great  Asiatic 
plains,  the  boats  which  conducted  the  earliest 
commerce  up  and  down  the  great  river 
courses,  carried  the  first  seeds  of  science, 
rehgion,  art,  law,  and  of  mutual  understand- 
ing and  good -will,  among  ever- widening 
circles  of  mankind.  Cut  off  commerce,  and 
you  destroy  every  mode  of  higher  inter- 
course.    Substitute  commercial  war  for  free 


116  THE  NEW  PROTECTIONISM 


exchange,  and  you  reverse  the  current  of  all 
civilization  and  drive  back  to  barbarism. 

The  full  pacific  virtues  of  Free  Trade  and 
the  constructive  policy  which  it  requires 
have  seldom  yet  been  recognized,  even  by 
professed  Free  Traders.  This  is  due  to  a 
failure  fully  to  appreciate  the  profound 
change  that  has  come  about  in  the  economic 
internationalism  of  the  last  half-century. 
Trade,  in  its  simple  meaning  of  exchange 
of  goods  for  goods,  does  not  cover  the  new 
industrial,  commercial,  and  financial  rela- 
tions between  members  of  different  countries. 
Cobden  was  admittedly  mistaken  in  thinking 
that  the  perception  of  their  obvious  self- 
interest  must  rapidly  lead  all  other  nations 
in  the  world  to  liberate  their  trade  as  we 
had  done,  and  that  this  universal  Free 
Trade  would  afford  security  against  future 
war.  His  error  lay  in  failing  to  perceive 
that,  though  the  interest  of  each  people  as 
a  whole  lay  in  freedom  of  commerce,  the 
interests  of  special  groups  of  traders  or  pro- 
ducers within  each  country  would  continue 


THE  OPEN  DOOR  117 


to  lie  along  the  lines  of  privilege  and  pro- 
tection, and  that  until  democracy  became 
a  political  reality  these  organized  group 
interests  might  continue  to  mould  the  fiscal 
policy  of  their  several  States. 

But  though  this  consideration  has  retarded 
the  pacific  influence  of  commerce,  it  has  not 
been  a  direct  and  potent  influence  for  inter- 
national dissension.  While  the  refusal  of 
nations  to  open  their  markets  on  equal 
terms  to  foreigners  retards  and  chills  friend- 
ship, it  does  not  normally  promote  hostility. 
It  is  the  struggle  for  colonies,  protectorates, 
and  concessions  in  undeveloped  countries, 
that  has  been  the  most  disturbing  feature 
in  modern  politics  and  economics.  Foreign 
policy  in  recent  decades  has  more  and  more 
turned  upon  the  acquisition  of  business  ad- 
vantages in  backward,  parts  of  the  world, 
spheres  of  commerce,  influence,  and  exploita- 
tion, leases,  concessions,  and  other  privileges, 
partly  for  commerce,  but  mainly  for  the 
profitable  investment  of  capital.  For  it  is 
the  export  of  capital,  the  wider  and  more 


118  THE  NEW  PROTECTIONISM 


adventurous  overflow  of  the  savings  of 
the  capitaUsts  of  the  developed  Western 
countries,  that  constitutes  the  new  and 
dominant  factor  in  the  modern  situation. 
Larger  and  larger  quantities  of  capital  are 
available  for  overseas  investment,  and 
powerful,  highly  organized  firms  and  groups 
of  financiers  seek  to  plant  out  these  savings 
in  distant  lands,  where  they  can  be  loaned 
to  spendthrift  monarchs  or  ambitious  Govern- 
ments, or  applied  to  build  railways,  harbours, 
or  other  public  works,  to  open  and  work 
mines,  plant  tea,  rubber,  or  sugar,  or  to 
serve  the  general  money  lending  operations 
which  pass  under  the  name  of  banking, 
^lany  hundreds  of  millions  of  pounds 
during  recent  years  have  been  flowing  from 
the  creditor  nations  of  Europe  into  this 
work  of  "  development,"  which  forms  the 
main  material  ingredient  in  what  is  some- 
times called  the  "march,"  sometimes  the 
"  mission,"  of  civilization  among  backward 
peoples. 

It  is  the  competition  between  groups  of 


THE  OPEN  DOOR  119 


business  men,  financiers,  and  traders,  in  the 
several  nations,  using  the  offices  of  their 
respective  Governments  to  assist  them  in 
promoting  these  profitable  business  enter- 
prises, that  has  underlain  most  of  the 
friction  in  modern  diplomacy  and  foreign 
policy,  and  has  brought  powerful  nations 
so  often  into  dangerous  conflict.  To 
prove  this  statement,  one  has  only  to  name 
the  countries  which  have  been  the  recent 
danger-areas  :  Egypt,  Morocco,  Tripoli, 
Transvaal,  Persia,  Mexico,  China,  the  Bal- 
kans. Though  in  every  case  other  considera- 
tions, racial,  political,  dynastic,  or  religious, 
are  also  involved,  sometimes  more  potent  in 
the  passions  they  evoke,  the  moving  and 
directing  influences  have  come  from  traders, 
financiers,  and  bondholders.  Through  the  en- 
tanglements of  Anglo-French  political  policy 
in  Egypt  runs  the  clear,  determinant  streak 
of  bondholding  interests.  The  kernel  of  the 
Moroccan  trouble  was  the  competition  of 
the  Mannesmann  and  tlie  Schneider  firms 
over  the  "  richest  iron  ores  in  the  world." 


120  THE  NEW  PROTECTIONISM 


Mining   financiers   moulded   the   policy    of 
South  Africa  towards  annexation  of  the  gold 
reef.     Tripoli   was   in    essence    a    gigantic 
business  coup  of  the  Banco  di  Roma.     In 
Mexico  history  will  find  a  leading  clue  to 
recent  disturbances  in  the  contest  of  two 
commercial  potentates  for  the  control  of  oil- 
fields.    Persia  came  into  modern  politics  as 
an  arena  of  struggle  between  Russian  and 
British  bankers,  seeking  areas  of  profitable 
concessions    and    spheres    of    financial    in- 
fluence.     In  China  it  was  the  competition 
for  railroads  and  for  leases  and  concessions, 
followed  by  forced  pressures,  now  competing, 
now   combining   to   plant   profitable  loans. 
Turkey  and  the  Balkans  became  an  incen- 
diary   issue    to   Western    Europe    because 
they  lay  along  the  route  of  German  econo- 
mic  penetration  in  Asia,  a  project  fatally 
antagonized  by  Russian  needs  for  "  free  " 
Southern  waters. 

The  pressure  of  demand  from  organized 
business  interests  for  preferential  economic 
opportunities  in  backward  countries  is  the 


THE  OPEN  DOOR  121 


driving  force  behind  the  grievances  and 
aspirations  of  thwarted  nationahsm,  poUtical 
ambition,  and  imperiaHstic  megalomania. 
A  recent  writer*  has  thus  condensed  these 
facts  of  history  :  *'  It  is  essential  to  remem- 
ber that  what  turns  a  territory  into  a  diplo- 
matic problem  is  the  combination  of  natural 
resources,  cheap  labour,  markets,  defence- 
lessness,  corrupt  and  hiefficient  government." 
If  the  Free  Trade  policy  is  to  fulfil  its 
mission  as  a  civilizing,  pacifying  agency,  it 
must  adapt  itself  to  the  larger  needs  of  this 
modern  situation.  Free  Trade  is  indeed  the 
luicleus  of  the  larger  constructive  economic 
internationalism  ;  but  it  needs  a  conversion 
from  the  negative  conception  of  laissez  faire, 
laissez  alkr,  to  a  positive  constructive  one. 
The  required  policy  must  direct  itself  to 
secure  economic  liberty  and  equality  not  for 
trade  alone,  but  for  the  capital,  the  enterprise, 
and  the  labour,  which  are  required  to  do  the 
work  of  development  in  all  the  backward 
countries  of  the  earth,  whether  those  coun- 

*  Mr.  Lippmann,  "  The  Stakes  of  Diplomacy,"  |^  93. 


W2  THE  NEW  PROTECTIONISM 


tries  *' belong  to"  some  civilized  State  or 
are  as  yet  independent  countries.  This 
fuller  doctrine  of  the  Open  Door,  or  equality 
of  economic  opportunity,  cannot,  however, 
be  applied  without  definite  co-operative 
action  on  the  part  of  nations  and  their 
Governments. 

This  needs  plain  recognition.  For  to  some 
who  have  perceived  the  dangerous  diplomatic 
emergencies  arising  from  the  support  given 
by  Governments  to  the  private  business 
ventures  of  their  nationals  it  has  appeared 
the  easiest  escape  to  advocate  a  doctrine  of 
mere  political  disinterestedness.  Let  Govern- 
ments give  their  traders,  investors,  and  finan- 
ciers, to  understand  that,  while  they  are  at 
liberty  to  enter  any  business  relations  they 
like  with  the  members  or  the  Governments  of 
other  nations,  they  are  not  empowered  to 
call  upon  their  Government  for  assistance, 
either  in  establishing  or  pushing  such  busi- 
ness, or  in  redressing  any  injuries  which  may 
be  done  to  them  or  their  property  interests. 
Such  business,  unauthorized  by  Government 


THE  OPEN  DOOR  123 


and  undertaken  for  private  profit,  must  carry 
its  own  risks.  Why,  it  is  asked,  should 
persons  who  have  staked  their  property 
in  countries  wliere  they  know  the  Govern- 
ment to  be  corrupt,  the  administration  of 
law  to  be  uncertain,  the  treatment  of 
foreigners  to  be  unjust,  and  who  presumably 
have  discounted  these  very  risks  m  the 
terms  of  their  investments  or  their  trade, 
be  at  liberty  to  call  upon  their  Governments 
to  use  the  public  resources  of  their  country  to 
rescue  them  from  these  risks  and  to  improve 
the  value  of  these  private  speculations  ?  The 
logic  of  this  attitude  appears  irrefutable. 
But  the  politics  are  utterly  unpractical  and 
inconsistent  with  humanitarian  progress. 
No  Government  has  ever  maintained,  or  can 
ever  maintain,  a  merely  disinterested  attitude 
towards  the  trade  or  other  economic  relations 
of  its  nationals  with  foreigners.  Govern- 
ments admittedly  are  concerned  with  the 
industry  and  commerce,  foreign  as  well  as 
domestic,  of  their  respective  peoples,  obtain- 
ing for   that  industry  and   commerce  such 


124  THE  NEAV  PROTECTIONISM 


TTf.r  h^^^ltf^"T'1r^^a■^^^^n^^^'l^^p^T1fi■^g^Tf^^lTnrwlfp^J^^*-ppfsv'*r'1V''lr^^ 


conditions  as  may  secure  for  private  effort 
and  enterprise  the  best  results.  In  this 
capacity  they  have  always  been  accustomed 
to  use  the  diplomatic  machinery  to  secure 
for  their  '*  national "  trade  such  liberties  and 
opportunities  in  foreign  lands  as  are  attain- 
able by  arrangement  with  foreign  Govern- 
ments. Most  of  these  arrangements  consist 
in  the  removal  or  abatement  of  legal,  fiscal, 
or  other  **  artificial "  restrictions,  or  in  pro- 
moting the  general  safety  of  life  and  pros- 
perity of  their  nationals.  This  work,  done 
by  diplomatic  intercourse,  special  treaty 
stipulations,  consular  representations,  etc., 
is  work  done  by  the  State  for  the  interest  of 
the  public  as  a  whole.  It  is  designed  to 
strengthen  and  improve  the  commercial  and 
other  relations  between  the  countries  in 
question.  But  since  this  business  is,  in  fact, 
conducted  by  certain  firms  or  persons,  whose 
interests  are  particularly  engaged  in  it,  the 
benefits  of  this  State  action  are  directly  and 
chiefly  reaped  by  them,  and  come  home  in 
enlarged   private   gains.      But  no   one  can 


THE  OPEN  DOOR  125 


advocate  tlie  total  abstention  of  Govern- 
ments from  this  work,  on  the  ground  that 
its  direct  gains  are  not  equally  distributed 
throughout  the  nation,  but  are  of  more 
advantage  to  certain  individuals  and  classes 
than  to  others.  The  general  effect  of  this 
consular  and  other  Governmental  action  is 
to  secure  larger  and  freer  opportunities 
for  trade  and  investment  for  all  members 
of  the  nation  capable  of  engaging  in  such 
business,  and  some  of  the  value  of  these 
enlarged  business  opportunities  comes  home 
to  the  nation  as  a  whole  in  its  capacity 
of  a  "  consuming  public." 

It  is  doubtless  a  more  controversial  issue 
how  far  it  is  legitimate  for  a  Government 
to  employ  political  pressure  to  assist  or 
advance  the  particular  claims  or  interests  of 
a  firm  or  syndicate  pushing  a  special  financial 
deal,  or  contract,  or  concession,  upon  the 
Government  or  people  of  a  foreign  country, 
or  to  confer  the  semi-official  authority  of  a 
charter  upon  a  company  claiming  a  monopoly 
of  trade  or  developmental  activities  in  some 


126  THE  NEW  PROTECTIONISM 

"  backward  area."  But  these  practices  have 
been  so  deep-set  m  the  grooves  of  history 
that  it  is  impossible  to  expect  from  any 
State  a  simple  policy  of  renunciation.  Busi- 
ness men  have  always  looked  to  their  Govern- 
ments to  secure  for  them  fair  or,  if  possible, 
preferential  opportunities  in  business  with 
foreign  countries,  and  they  have  never  looked 
in  vain.  Upon  the  whole,  it  would  be  urged, 
this  policy  of  pushful  business,  aided  by 
political  support,  has  made  for  enlarged  and 
freer  commercial  intercourse,  and  has  been 
essential  in  the  work  of  developing  distant 
markets  and  more  remote  resources.  It  is 
inconceivable  that  Great  Britain  or  any  other 
civilized  nation  would  be  willing  to  renounce 
such  political  aids  while  other  nations  still 
retained  them.  Is  it  more  conceivable  that 
all  Governments  by  simultaneous  agree- 
ment should  stand  aside,  giving  no  more 
support  to  their  nationals  in  foreign  trade 
or  investments  ?  Yet  nothing  can  be  more 
certain  than  that  this  competing  support  of 
Governments  to  foreign  business  enterprises 


THE  OPEN  DOOli  127 


of  their  countrymen  must,  if  it  continues, 
ripen  new  dangerous  diplomatic  situations, 
and  form  the  substance  of  conflicting  foreign 
policies  and  competing  armaments.  No 
I^eague  of  Nations,  no  Hague  Conventions, 
or  other  machinery  for  settling  international 
disputes,  are  likely  to  furnish  any  reasonable 
security  for  peace  or  for  reduced  armaments, 
unless  this  problem  of  conflicting  interests 
in  the  profitable  exploitation  of  new  markets 
and  backward  countries  can  be  solved.  Now 
there  is  only  one  line  along  which  solution  is 
possible.  We  cannot  revert  to  strictly  private 
enterprise,  Governments  looking  on  with 
folded  arms,  while  private  companies,  with 
armed  forces  of  their  own,  fasten  political 
and  economical  dominion  upon  rubber  or 
oil  or  gold  fields  in  Africa  or  South  America, 
enslaving  or  killing  off  the  native  population, 
as  in  San  Thome  or  Putumayo,  and  using 
up  the  rich  natural  resources  of  tlie  country 
in  a  brief  era  of  reckless  waste.  The  only 
alternative  is  to  advance  to  a  settled  policy 
of  international  arrangement  for  securing,  if 


128  THE  NEW  PROTECTIONISM 


possible,  that  this  commercial  and  develop- 
mental work  shall  in  the  future  be  conducted 
on  a  basis  of  pacific  co-operation  between  the 
business  groups  in  the  respective  countries 
under  the  joint  control  of  their  Governments. 
This  process  of  economic  penetration  and 
expansion  cannot  stop.  As  more  nations 
advance  farther  along  the  road  of  capitalist 
industry,  the  overflows  of  ti'ade  and  capital, 
seeking  more  distant  and  more  various  fields 
of  enterprise,  will  be  stronger  in  their  pres- 
sure. This  pressure  has  been  the  driving 
force  in  the  modern  Imperialism  of  the 
Western  nations,  stimulating  them  to  dis- 
cover "  spheres  of  legitimate  aspiration," 
*' spheres  of  influence,"  "protectorates, 
"  colonies,"  "  places  in  the  sun,"  and  forcing 
their  Governments  into  dangerous  situa- 
tions. The  process  cannot  stop.  But  it 
may  be  possible  to  extract  from  it  the 
poisonous  sting  of  international  rivalry. 
Why  should  not  these  necessary  economic 
processes  of  expansion  and  development  be 
carried  on  by  paciflc  international  arrange- 


1? 


THE  OPEN  DOOR  129 


ments  ?  The  germs  of  such  arrangements 
are  to  be  found  in  the  Congo  Conference  of 
Berhn  in  1884-85,  in  which  were  repre- 
sented England,  Germany,  Austro-Hungary, 
Belgium,  Denmark,  Spain,  the  United 
States,  France,  Italy,  Holland,  Portugal, 
Russia,  Sweden- Norway,  Turkey.  "  This 
Conference  stipulated  freedom  of  commerce, 
interdiction  of  slave-trade,  and  neutraliza- 
tion of  the  territories  in  the  Congo  district, 
and  secured  freedom  of  navigation  on  the 
Rivers  Congo  and  Niger."*  A  somewhat 
similar  international  agreement  was  made, 
first  in  1880  at  the  Madrid  Convention, 
afterwards  in  1906  at  the  Algec^iras  Con- 
vention for  the  economic  internationalization 
of  Morocco.  Though  in  the  earlier  Conven- 
tion only  the  nations  immediately  interested 
were  represented,  the  most  notable  outcome 
was  the  extension  to  all  nations  of  "  the 
most-favoured  nation  treatment,"  hitherto 
confined  to  France  and  Britain.  The  treaty 
was  signed  by  all  the   Western  European 

*  Oppenlieim,  *'  International  Law,"  vol.  ii.,  p.  71. 


130         THE  NEW  PROTECTIONISM 

Powers  and  by  the  United  States.  Far 
more  explicit,  however,  were  the  provisions 
for  equahty  of  economic  opportunity  fur- 
nished by  the  Act  of  Algeciras.  It  provided 
not  only  for  equality  of  trade,  but  for  strict 
impartiality  in  loans  and  investments  ob- 
tained from  foreign  countries.  Still  more 
important,  the  advantage  of  international 
over  purely  national  control  is  shown  in  the 
provisions  made  for  protecting  the  legitimate 
rights  of  the  backward  country  which  is  the 
object  of  economic  penetration. 

As  to  the  public  services  and  the  construc- 
tion of  public  works,  the  Act  declared  that 
in  no  case  should  the  rights  of  the  "  State 
over  the  public  services  of  the  Sheereefian 
Empire  be  alienated  for  the  benefit  of 
private  interests."  If  the  Moorish  Govern- 
ment had  recourse  to  foreign  capital  or 
industries  in  connection  with  the  public 
services  or  public  works,  the  Powers  under- 
took to  see  that  "  the  control  of  the  State 
over  such  large  undertakings  of  public  in- 
terest  remain   intact  "  ;    tenders,   '*  without 


THE  OPEN  DOOR  131 

respect  of  nationality,"  should  regulate  all 
orders  for  public  works  or  the  furnishing  of 
supplies  ;  no  specification  for  orders  should 
contain  either  "  explicitly  or  implicitly  any 
condition  or  provision  of  a  nature  to  violate 
the  principle  of  free  competition  or  to  place 
the  competitors  of  one  nationality  at  a  dis- 
advantage as  against  the  competitors  of 
another "  ;  "  regulations  as  to  contracts 
should  be  drawn  up  by  the  Moorish 
Government  and  the  Diplomatic  Body  at 
1  angler.  * 

This  Agreement  presents  an  excellent 
model  for  the  larger  policy  of  the  Open 
Door,  in  defining  the  economic  relations  of 
the  Governments  and  peoples  of  advanced 
towards  backward  countries.  If  all  backward 
countries,  whether  under  the  political  control 
of  some  European  or  other  "  advanced  " 
State  or  still  politically  independent,  were 
formally  recognized  by  Conventions  of 
the  civilized  Powers   as    similarly  open    to 

*  "Ten  Years  of  Secret  Diplomacy,"  by  K.  D.  Morel, 
p.  31. 


132  THE  NEW  PROTECTIONISM 


the  trading  and  investing  members  of  all 
countries  on  a  basis  of  economic  equality, 
with  adequate  mutual  guarantees  for  the 
enforcement  of  the  treaty  obligations,  the 
greatest  step  towards  lasting  and  universal 
peace  would  have  been  taken. 

It  would  need,  however,  to  be  supple- 
mented and  supported  by  other  steps  in 
order  to  achieve  the  full  policy  of  equality 
of  economic  opportunity  and  to  safeguard 
the  interests  of  the  inhabitants  of  backward 
areas  thus  brought  within  the  area  of 
economic  internationalism.  The  substance 
of  the  Open  Door  policy  may  be  stated  in 
the  following  four  proposals,  which,  in  order 
to  be  effective,  should  be  incorporated  in  a 
general  Treaty  or  Convention  signed  by  all 
the  Powers : 

1.  Freedom  of  access  for  traders  and  goods 
of  ail  nations  to  trade  routes  by  land,  river, 
canal,  or  sea,  including  the  use  of  rail 
terminals,  ports  and  coaling-stations,  police 
protection  and  other  facilities,  upon  terms  of 
equality.  Countries  like  Servia  or  Poland 
must  not  be  at  the  mercy  of  possibly  hostile 


THE  OPEN  DOOR  133 


iieiij^hbours  for  commercial  access  to  the  out- 
side  world.  The  export  of  wheat  from 
Russia  and  Roumania  must  not  be  impeded 
in  the  future,  as  often  in  the  past,  by  the 
closing  of  the  Dardanelles.  No  Power  must 
hold  the  keys  of  the  JNIediterranean  or  the 
Pacific.  The  Panama  and  Kiel  Canals  must 
be  placed  on  the  same  basis  of  free  use  as 
the  Suez  Canal.  No  Power  must  reserve 
the  right  to  close  trade-gates  at  any  time  to 
traders  of  other  nations. 

2.  Equal  admission  to  markets  and  other 
trading  facilities  to  be  accorded  by  all  Powers 
to  foreign  traders  in  all  their  dependencies. 

This  provision  (an  extension  of  the  existing 
British  practice)  would  leave  it  open  to  the 
Powers  to  retain  tariff  and  other  protection 
for  their  home  markets.  It  would  simply 
preclude  them  from  extending  the  area  of 
Protection  to  colonies,  protectorates,  and 
spheres  of  influence.  Self-governing  colonies, 
already  possessing  and  exercising  full  control 
over  their  commercial  and  fiscal  policy, 
would  also  be  excluded  from  this  stipuhition. 

3.  Equal  opportunities  for  the  investment 
of  capital  in  every  form  of  business  enter- 
prise and  for  full  legal  protection  of  all 
property  for  members  of  all  nations  in  the 
dependencies  of  other  nations. 

4.  The    establishment    of     International 


134  THE  NEW  PROTECTIONISM 


Commissions  to  secm-e  equality  of  treatment 
for  the  commerce,  investments  and  other 
property  interests,  of  the  subjects  of  the 
treaty  Powers,  in  all  backward  or  unde- 
veloped countries  not  under  the  political 
control  of  any  Power.  Such  Commissions 
might  by  concerted  action  exercise  a  re- 
strictive control  over  the  nature  of  the  trade 
with  "  lower  races,"  precluding,  for  example, 
the  importation  of  arms  or  alcoholic  liquors. 
They  might  also  exercise  a  supervising 
authority  over  the  loans  and  investments 
made  by  financiers  to  the  Governments  or 
private  persons  in  these  backward  countries, 
and  over  the  methods  of  business  exploita- 
tion employed  by  the  agents  of  the  investing 
companies. 

Whether  these  Commissions  should  en- 
deavour to  interpret  "  equality  of  oppor- 
tunity "  by  some  process  of  apportioning 
special  spheres  of  interest  and  enterprise  to 
the  members  of  the  several  Powers,  or 
whether  they  should  encourage  direct  co- 
operation in  the  work  of  investment  and 
development  between  business  men  of  dif- 
ferent nations,  is  a  question  into  which  I 
need  not  enter  here.     But  readers  may  be 


THE  OPEN  DOOR  135 

reminded  that  control  by  International 
Commission  is  no  untried  method  of  regu- 
lating the  diverse  and  conflictiiig  interests 
of  States.  Four  International  Commissions 
have  been  instituted  for  dealing  with  ques- 
tions of  navigation,  on  the  Danube,  the 
Congo,  and  the  Suez  Canal.  Three  Inter- 
national Commissions  have  concerned  them- 
selves with  questions  of  sanitation  on  the 
Lower  Danube,  at  Constantinople,  and  at 
Alexandria.  Three  others  are  concerned 
with  the  interest  of  foreign  creditors  in 
Turkey,  Egypt,  and  Greece,  while  a  per- 
manent Commission  relating  to  sugar 
bounties  was  set  up  in  1902  by  the  Brussels 
Convention. 

AV^hy  should  not  some  such  machinery  by 
Commission  be  extended  and  endowed  with 
adequate  administrative  powers,  so  as  to 
form  the  nucleus  of  an  efficient  international 
Government  regulating  those  economic  re- 
lations between  the  advanced  and  backward 
peoples  which  are  the  most  dangerous  causes 
of  dispute  between  modern  Governments? 


136  THE  NEW  PROTECTIONISM 


Taken  in  conjunction  with  the  other 
applications  of  the  Open  Door,  this  direct 
endeavour  to  give  a  positive  construction  to 
the  principle  of  equality  of  opportunity 
would  seem  to  be  the  most  feasible  and 
efficacious  w^ay  of  dealing  with  the  gravest 
practical  problem  of  our  time.  * 

This  policy  I  present  as  the  true  alterna- 
tive to  the  reactionary  policy  of  economic 
nationalism  urged  by  our  New  Protec- 
tionists in  the  name  of  defence.  The  true 
defence,  the  only  possible  security  against 
future  wars,  is  to  extend  and  strengthen  the 
bonds  of  economic  and  human  intercourse 
between  members  of  all  nations,  to  remove 
the  causes  of  economic  antagonism  which 
have  hitherto  bred  dissension,  and  to  substi- 
tute conditions  of  fair  competition  and  fruit- 
ful co-operation.  The  issue  is  indeed  a 
grave  one.  Are  we  to  aim  at  breaking  up 
the    economic    world    into    self-contained 

*  A  vigorous  and  well-informed  advocacy  of  Inter- 
national Commissions  is  contained  in  Mr.  Lippmann's 
*^The  Stakes  of  Diplomacy"  (Henry  Molt  and  Co.). 


THE  OPEN  DOOR  137 


nations,  or  groups  of  nations,  not  indifferent 
but  actively  hostile  to  one  another  in  all 
parts  of  the  earth,  and  incessantly  engaged 
in  fighting  one  another  by  tariffs,  boycotts, 
Navigation  Acts,  and  every  weapon  and 
barrier  they  can  command,  reducing  the 
total  productivity  of  the  earth,  increasing 
the  difficulties  of  transport  and  commerce, 
and  enforcing  the  application  of  an  ever- 
growing proportion  of  each  nation's  wealth 
to  war  preparations  which  ever  tend  to  fulfil 
the  fearful  purpose  for  which  they  are  de- 
signed ?  Or  are  we  to  trust  to  the  salutary 
effects  of  a  Free  Trade  which  has  not  yet 
been  adequately  tried,  and  to  the  extension 
of  its  principles  to  the  new  conditions  of 
international  intercourse  by  the  establish- 
ment of  public  international  control  and 
guarantees  ?  Place  the  risks  and  the  difli- 
culties  of  this  latter  policy  as  high  as  you 
choose,  they  fall  immeasurably  short  of 
those  to  which  the  fonner  policy  exposes 
this  nation  and  tlie  world.  The  path  of 
safety,  as  of  opulence,  lies  in   the  forward 


138  THE  NEW  PROTECTIONISM 


movement  towards  economic  international- 
ism, not  in  a  reversion  towards  a  national 
economy  which  for  a  country  with  our  past 
and  present  is  impracticable,  and,  were  it 
practicable,  would  be  none  the  less  a  be- 
trayal of  civilization  for  ourselves  and  for 
humanity. 


APPENDICES 


APPENDIX  A 

RECOMMENDATIONS  OF  THE 

ECONOMIC  CONFERENCE  OF  THE 

ALLIES  HELD  AT  PARIS, 

June  14,  15,  16,  17,  1916 

I 

The  representatives  of  the  Allied  Govern- 
ments have  met  at  Paris  under  the  presi- 
dency of  M.  Clementel,  jSIinister  of  Com- 
merce, on  June  14,  15,  16,  and  17,  1916,  for 
the  purpose  of  fulfiUing  the  mandate  given 
to  tliem  by  the  Paris  Conference  of  March  28, 
1916,  of  giving  practical  expression  to  their 
solidarity  of  views  and  interests,  and  of  pro- 
posing to  their  respective  Governments  the 
appropriate  measures  for  realizing  this  soli- 
darity. 

II 
They  declare  that  after  forcing  upon  them 
the    military  contest,  in    spite   of  all    tlieir 

141 


142  THE  NEW  PROTECTIONISM 

efforts  to  avoid  the  conflict,  the  Empires  of 
Central  Europe  are  to-day  preparing,  in 
concert  with  their  alKes,  for  a  contest  on 
the  economic  plane,  which  will  not  only 
survive  the  re-establishment  of  peace,  but 
will  at  that  moment  attain  its  full  scope  and 
intensity. 

Ill 

They  cannot  therefore  conceal  from  them- 
selves that  the  agreements  which  are  being 
prepared  for  this  purpose  between  their 
enemies  have  the  obvious  object  of  establish- 
ing the  domination  of  the  latter  over  the 
production  and  the  markets  of  the  whole 
world,  and  of  imposing  on  other  countries 
an  intolerable  yoke. 

In  face  of  so  grave  a  peril,  the  repre- 
sentatives of  the  Allied  Governments  con- 
sider that  it  has  become  their  duty,  on 
grounds  of  necessary  and  legitimate  defence, 
to  adopt  and  realize  from  now  onward  all 
the  measures  requisite,  on  the  one  hand,  to 
secure  for  themselves  and  for  the  whole  of 
the  markets  of  neutral  countries  full  economic 


APPENDIX  A  Ui3 


independence  and  respect  for  sound  com- 
mercial practice ;  and,  on  the  other  hand,  to 
facihtate  the  organization  on  a  permanent 
basis  of  their  economic  aUiance. 

For  this  purpose  the  representatives  of 
the  Alhed  Governments  have  decided  to 
submit  for  the  approval  of  those  Govern- 
ments the  following  resolutions  : 

A 

MEASURES  FOR  THE  WAR  PERIOD 

I 

The  laws  and  regulations  prohibiting 
trading  with  the  enemy  shall  be  brouglit 
into  accord. 

For  this  purpose — 

A. — The  Allies  will  prohibit  their  own 
subjects  and  citizens  and  all  per- 
sons residing  in  their  territories 
from  carrying  on  any  trade  with — 

1.  The  inhabitants  of  enemy  countries 

whatever  their  nationahty. 

2.  Enemy  subjects  wherever  resident. 


144  THE  NEW  PROTECTIONISM 


8.  Persons,  firms,  and  companies, 
whose  business  is  controlled 
wholly  or  partially  by  enemy 
subjects,  or  is  subject  to  enemy 
influence  and  whose  names  are 
included  in  a  special  list. 

B.— They  will  prohibit  the  importation 
into  their  territories  of  all  goods 
originating  in  or  coming  from 
enemy  countries. 

C. — They  will  devise  means  of  estab- 
lishing a  system  enabling  contracts 
entered  into  with  enemy  subjects 
and  injurious  to  national  interests 
to  be  cancelled  unconditionally^ 

II 

Business  undertakings  owned  or  operated 
by  enemy  subjects  in  the  territories  of  the 
Allies  will  all  be  sequestrated  or  placed 
under  control ;  measures  will  be  taken  for 
the  purpose  of  winding  up  some  of  these 
undertakings  and  of  realizing  their  assets, 


APPENDIX  A  145 


the  proceeds  of  such  reahzation  remaining 
sequestrated  or  under  control. 

Ill 

In  addition  to  the  export  prohibitions 
which  are  necessitated  by  the  internal  situa- 
tion of  each  of  the  Allied  countries,  the  Allies 
will  complete  the  measures  already  taken 
for  the  restriction  of  enemy  supplies,  both 
in  the  mother-countries  and  in  the  Domi- 
nions, Colonies,  and  Protectorates — 

1.  By  unifying  the  lists  of  contraband 

and  of  export  prohibition,  and 
particularly  by  prohibiting  the 
export  of  all  commodities  de- 
clared absolute  or  conditional 
contraband  ; 

2.  By  making  the  grant  of  licences  for 

export  to  neutral  countries  from 
whicli  export  to  enemy  terri- 
tories might  take  place  condi- 
tional upon  the  existence  in  su(  h 
countries   of   control    organ i/a- 

10 


146  THE  NEW  PROTECTIONISM 

tions  approved  by  the  Allies ;  or, 
in  the  absence  of  such  organiza- 
tions, upon  special  guarantees 
such  as  the  limitation  of  the 
quantities  exported,  supervision 
by  Allied  consular  officers,  etc. 

B 

TRANSITORY    MEASURES    FOR    THE 

PERIOD    OF    COMMERCIAL,    INDUSTRIAL, 

AGRICULTURAL,   AND    MARITIME 

RECONSTRUCTION    OF    THE 

ALLIED   COUNTRIES 


The  Allies  declare  their  common  determi- 
nation to  insure  the  re- establishment  of  the 
countries  suffering  from  acts  of  destruction, 
spoliation  and  unjust  requisition,  and  decide 
to  join  in  devising  means  to  secure  the 
restoration  to  those  countries,  as  a  prior 
claim,  of  their  raw  materials,  industrial  and 
agricultural  plant,  stock  and  mercantile  fleet, 
or  to  assist  them  to  re- equip  themselves  in 
these  respects. 


APPENDIX  A  117 


II 

Whereas  the  war  has  put  an  end  to  all 
the  treaties  of  commerce  between  the  Allies 
and  the  Enemy  Powers,  and  whereas  it  is  of 
essential  importance  that,  during  the  period 
of  economic  reconstruction  which  will  follow 
the  cessation  of  hostilities,  the  liberty  of 
none  of  the  Allies  should  be  hampered  by 
any  claim  put  forward  by  the  Enemy 
Powers  to  most-favoured-nation  treatment, 
the  Allies  agree  that  the  benefit  of  this 
treatment  shall  not  be  granted  to  those 
Powers  during  a  number  of  years  to  be  fixed 
by  mutual  agreement  among  themselves. 

During  this  number  of  years  the  Allies 
undertake  to  assure  to  each  other  so  far  as 
possible  compensatory  outlets  for  trade  in 
case  consequences  detrimental  to  their  com- 
merce result  from  the  application  of  the 
undertaking   referred    to    in    the   preceding 

paragraph. 

Ill 

The  Allies  declare  themselves  agreed  to 
conserve  for  the  Allied  countries,  before  all 


148  THE  NEW  PROTECTIONISM 


others,  their  natural  resources  during  the 
whole  period  of  commercial,  industrial, 
agricultural,  and  maritime  reconstruction, 
and  for  this  purpose  they  undertake  to 
establish  special  arrangements  to  facilitate 
the  interchange  of  these  resources. 

IV 

In  order  to  defend  their  commerce,  their 
industry,  their  agriculture,  and  their  naviga- 
tion, against  economic  aggression  resulting 
from  dumping  or  any  other  mode  of  unfair 
competition,  the  Allies  decide  to  fix  by 
agreement  a  period  of  time  during  which 
the  commerce  of  the  Enemy  Powers  shall 
be  submitted  to  special  treatment,  and  the 
goods  originating  in  their  countries  shall  be 
subjected  either  to  prohibitions  or  to  a 
special  regime  of  an  effective  character. 

The  Allies  will  determine  by  agreement 
through  diplomatic  channels  the  special 
conditions  to  be  imposed  during  the  above- 
mentioned  period  on  the  ships  of  the  Enemy 
Powers. 


APPENDIX  A  149 


V 

The  Allies  will  devise  tlie  measures  to  be 
taken  jointly  or  severally  for  preventing 
enemy  subjects  from  exercising,  in  their 
territories,  certain  industries  or  professions 
which  concern  national  defence  or  economic 
independence. 


PERMANENT  MEASURES  OF  MUTUAL 
ASSISTANCE  AND  COLLABORATION 
AMONG   THE   ALLIES 

I 

The  Allies  decide  to  take  tlie  necessary 
steps  without  delay  to  render  tliemsehes 
independent  of  the  enemy  countries  in  so 
far  as  regards  the  raw  materials  and  manu- 
factured articles  essential  to  the  normal 
development  of  their  economic  activities. 

These  steps  should  be  directed  to  assuring 
the  independence  of  the  Allies  not  only  so 
far  as  concerns  their  sources  of  supply,  but 
also  as  regards  their  financial,  conunercial, 
and  maritime  organization. 


150         THE  NEW  PROTECTIONISM 


The  Allies  will  adopt  the  methods  which 
seem  to  them  most  suitable  for  the  carrying 
out  of  this  resolution,  according  to  the  nature 
of  the  commodities  and  having  regard  to 
the  principles  w^hich  govern  their  economic 
policy. 

They  may,  for  example,  have  recourse 
either  to  enterprises  subsidized,  directed,  or 
controlled,  by  the  Governments  themselves, 
or  to  the  grant  of  financial  assistance  for  the 
encouragement  of  scientific  and  technical 
research  and  the  development  of  national 
industries  and  resources  ;  to  Customs  duties 
or  prohibitions  of  a  temporary  or  permanent 
character ;  or  to  a  combination  of  these 
different  methods. 

Whatever  may  be  the  methods  adopted, 
the  object  aimed  at  by  the  Allies  is  to 
increase  production  within  their  territories 
as  a  whole  to  a  sufficient  extent  to  enable 
them  to  maintain  and  develop  their  economic 
position  and  independence  in  relation  to 
enemy  countries. 


APPENDIX  A  151 


II 

In  order  to  permit  the  interchange  of 
their  products,  the  Alhes  undertake  to 
adopt  measures  for  facihtating  their  mutual 
trade  relations  both  by  the  estabhshment 
of  direct  and  rapid  land  and  sea  transport 
services  at  low  rates,  and  by  the  extension 
and  improvement  of  postal,  telegraphic,  and 
other  communications. 

Ill 

The  Allies  undertake  to  convene  a 
meeting  of  technical  delegates  to  draw  up 
measures  for  the  assimilation,  so  far  as  may 
be  possible,  of  their  laws  governing  patents, 
indications  of  origin,  and  trade-marks. 

In  regard  to  patents,  trade-marks,  and 
literary  and  artistic  copyright,  which  have 
come  into  existence  during  tlie  war  in 
enemy  countries,  the  Allies  will  adopt,  so 
far  as  possible,  an  identical  procedure,  to  be 
applied  as  soon  as  hostilities  cease. 

This  procedure  will  be  elaborated  by  the 
technical  delegates  of  the  Allies. 


152  THE  NEW  PROTECTIONISM 


D 

Whereas  for  the  purposes  of  their  common 
defence  against  the  enemy  the  Alhed  Powers 
have  agreed  to  adopt  a  common  economic 
poHcy,  on  the  hnes  laid  down  in  the  Resolu- 
tions which  have  been  passed,  and  whereas 
it  is  recognized  that  the  effectiveness  of  this 
policy  depends  absolutely  upon  these  Resolu- 
tions being  put  into  operation  forthwith,  the 
representatives  of  the  Allied  Governments 
undertake  to  recommend  their  respective 
Governments  to  take  without  delay  all  the 
measures,  whether  temporary  or  permanent, 
requisite  for  giving  full  and  complete  effect 
to  this  policy  forthwith,  and  to  communicate 
to  each  other  the  decisions  arrived  at  to  attain 
that  object. 

Board  of  Trade, 

June  21,  U)lO'. 


APPEiNDlX  B 


SUGGESTED  TARIFF  ADOPTED 

BY  THE  COUNCIL  OF  THE  LONDON 

CHAMBER  OF  COMMERCE, 

May  25,  1916 

RATES  OF  DUTIES  UNDER  TENTATIVE  TARIFF 


(a)  ^\'llolly  manufac- 

Enemy 
Countries. 

1 
Neutrals. 

i 

1 

Allies. 

British 

Empire 

Coiintries. 

1 

30% 

20% 

10% 

*io% 

tured  goods 

j  ad  vol. 

ad  val. 

ad  val. 

ad  val. 

(b)  Semi -manufac- 

'     15% 

10% 

5% 

*5% 

tured  goods  and 

ad  val. 

ad  val. 

ad  val. 

ad  val. 

articles    used 

solely    as    raw 

materials 

(e)  Foodstuffs,  manu- 

7i% 

m. 

m% 

factured 

ad  val. 

ad  val. 

ad  val. 

ad  val. 

(d)  Foodstuffs,  raw   - 

5% 

2i% 

Free 

Free 

(e)   Raw  materials     -  '. 

Free 

Free 

Free 

Free 

{/)  A\'ines,      spirits, 

^^'ar 

A\'ar 

\\^ar 

^V^ar 

beer,     tobacco, 

rates 

rates 

rates 

rates 

and    other    ar- 

plus 

ticles  now  sub-  i 

•50% 

ject  to  duty 

*  Subject  to  any  rebate  ecjuivalent  to  preference  accorded 
goods  from  the  United  Kingdom. 

NoTK. — Sliould  any  neutral  counlr)'  accord  a  tariff  jirefer- 
ence  to  any  otlier  countir,  a  surta.v  equivalent  to  the  prefer- 
ence to  be  imposed  on  goods  imported  into  the  United 
Kingdom. 

153 


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